by

John Wright

December 10, 2008

I have read, watched, indeed been verbally assailed by proclamations, analyses, analogies and direct accusations related to our current global and national economic problems. These come primarily from the full range of old-fashioned liberal democrats to the most conservative republicans and neocons; not to mention embarrassed financial institution executives, automobile executives, Internet financial "pundits" and stock market shills. Most common folks have little to say except for concern over loss of jobs, which is really the place where the rubber meets the road. Some political and business comments have limited substance but most are weakly developed examples of the ridiculous or of tunnel vision. As to the broadcast and printed media, accusations of superficial reporting would be a compliment. Misdirection and superficiality are both present. So many have so much to say off target about the required fixes to the global and especially the USA economy that I feel forced to ask a few pointed questions and to provide a few rather blunt answers.

Can you actually believe the global economy could be brought down by the failure of derivative values for a small percentage of the mortgages in the USA, the sub-prime segment? Was Lehman Brothers supporting the world on its shoulders? Is it not obvious that a poor USA job market with continuous downward pressure on wages and salaries has resulted in a major economic implosion when combined with what is truly high inflation, with sub-prime mortgages being only one part of a multifaceted problem?

What other very relevant cause and effect topics are being ignored, indeed hidden, like the combination effect on many families of out of control credit card debt, job losses and higher mortgage payments due to variable rate mortgages outside the sub-prime market? What are the most serious problem areas yet to occur that no one in power appears willing to address openly in writing articles or speaking publicly, like massive coming inflation when bailouts and later public works projects and the return of welfare cause the dollar to be devalued to about one half of its current purchasing power? Are we headed towards global depression and possibly war, or will the various governments of the world find a way to return us to normalcy, whatever that is, without war, physical or economic?

Who should go to prison as responsible parties for this debacle? Realize that what has happened is not a natural event like a tornado … all of this is a manmade disaster the bulk of which was created in the last 28 years by a very tiny percentage of the global population. Ultimately I want you to read or reread the parts of my book, Destiny, which discuss limits to the aggregation of wealth and power, for governments, businesses and individuals. Therein is one of the essential keys to understanding the past, the present and our path to the future as a species, regardless of the circuitous nature of the path we may take to get there.

I will address the questions I asked above, pose yet other questions and I will discuss a variety of related topics. I will attempt to make some kind of sense out of the confusing mess. I will provide my assessment of where we are going, why and when and how. Alas, there are, as usual, alternative scenarios, but I will give the odds as I see them. This undertaking requires patience and balance and vision, not to mention some serious access to and compilation of relevant factual data, and at the moment I am feeling impatient, off balance and misled. This is not to say that I am without factual understandings, nor am I naive. I am, however, trying to organize my thoughts around this massive problem so as to produce something useful to you. But we have to start with a compound problem statement.

The gross stupidity and the greed that underpinned our evolution to economic Armageddon over the most recent 28 years disgust me, starting with the economic policies of the Reagan administration. That administration permitted indeed encouraged a major period of large mergers and acquisitions. Reagan ran up huge federal deficits for military hardware, with no war. He deregulated the airline industry and in the process ruined air transportation comfort and profitability. He dumped mental hospital patients while governor of California and thus he created our first experiences with a sizeable homeless population begging in the streets. What amoral stupidity, and it should have been a heeded warning! With Clinton we appeared to develop some economic sense in eliminating the federal deficit, but at the same time he and our Congress approved and implemented NAFTA. Following NAFTA, multiple other trade agreements in the Western Hemisphere and the Middle East similar to NAFTA and the equivalent in the Asia-Pacific region (APEC) were executed. This horrible series of errors was suicidal re. the USA job market, especially free trade with China with no required trade parity.

That crimes of great magnitude have been committed against common citizens in the USA and elsewhere is not even questionable. Any person, group, political body, business or member of or appointee of the federal government and/or state governments that cannot or will not learn and use essential lessons from history, i.e., the Great Depression, or the earlier need for the Sherman Antitrust act is unworthy of respect, regardless of title or wealth. Any and all of those same individuals or organizations that permitted or participated in the undermining of the financial security of common USA citizens, such that highly skewed distribution of wealth became significantly more pronounced since 1980 must be punished severely. There are no valid excuses, period. Penalties must be paid for malfeasance, including broad interpretations that support the punishment of corporate executives for a variety of actions that undermined the USA economy, e.g. offshoring and illegal immigration. Penalties must be paid by financial institutions and even by department stores for usury practices dating back to as early a time as the 1960’s, e.g. Sears and Roebuck 24% annual interest on their credit card.

In short, that which was permitted or caused to be "legal" and those who took unfair advantage of an unwitting general population (yes, most of the citizenry are absolutely not intelligent and are thus not responsible for making bad decisions when conned by those more intelligent in positions of power) by engaging in those usury activities, along with the political bodies that permitted the financial raping of these American people and the elimination of their jobs, must be stripped of all wealth and imprisoned. Hiding major crimes behind the skirts of bad laws and bad lawmakers is simply not acceptable. And to be very blunt, USA common citizens had no real ability to change anything through voting. The machinery to select candidates made the whole "democratic" process of elections functionally meaningless. Also consider the regressive tax represented by the various state lotteries … and particularly the legislators who have openly screwed the less mentally and financially capable citizens, and for that alone they must be imprisoned. Talk about "taxation without representation!" Let us not forget the real impact of NAFTA and APEC, where cheap labor was sought with no tariffs. That killed our economy by killing many of our essential and higher paying jobs and especially by stopping any USA investment in upgrading our manufacturing capabilities. You will find my spot on analysis of that issue in Destiny, which was published some ten years ago.

Apart from the present disaster these actions have created it is important to understand that the federal government, most large corporations and our financial institutions all were accomplices in undermining the USA economy for short-term gain. This was not an oversight of leadership. It was the planned undermining of the power of the ordinary American citizens to work, manage and control their own financial destinies. This was done via advertising enticements, irresponsible monetary policies re. credit, and media control to avoid candor. Could a housing bubble have happened without the presence of absurdly easy credit for marginally intelligent individuals with far too little income?

I will never forget the ascension into power of the "stock market analysts" in the late 1980’s and early 1990’s and the major impact they suddenly had in driving the stock value of a company up or down in a major way based on current or projected short-term profits. No real analysis was done or credit given re. applied research or new products in the pipeline that would later grow a company, biotech companies excepted. I was horrified to see our companies executives develop financial policies that ignored long term growth in the name of short term profit, so as to gain their maximum compensation via stock options and bonuses. What damn foolishness it was to ignore the long-term effects! And what a ridiculous roller coaster was created with the stock market! The basic idea of investing in the stock of a well run company for long term gain, without absurd and very large short term losses simply no longer made any sense … and there we were with all the monies invested in mutual funds in 401K and equivalent plans just waiting to be decimated. And so it happened and it is continuing to happen now. To compare that government recommended legislated savings plan to the disaster that has already happened twice in the past eight years one can only conclude the presence of obvious collusion to crush the financial power of responsible retired savers by picking their pockets via induced fear. And lets not forget the negative tax consequences for younger people who become smart enough to understand the trap and then try to remove their money before age 59 1/2.

Oddly, I am not writing now as I usually do about ways to deal with problems as an individual in order to survive or prosper. In the current situation I seek control of my own thoughts to avoid producing diatribe from anger, unrealizable idealism or yet one other tunnel vision assessment of cause and effect. Do feel free to chastise me re. the anger diatribe. I want blood and I want it now! That we are now in a very bad financial situation that is soon to become a horrible situation is not in question. The walls are collapsing around us. The larger issues entail how this disaster will evolve, and then what to do about them on a national and a global scale.

It is, for instance, obvious that physical necessities like food, clothing, shelter and energy for heat and transportation must by force be made easily available to everyone regardless of individual financial state. To fail to do that will produce civil unrest of unbelievable magnitude. I am talking about temporary global as well as national socialism, which is something I despise conceptually, but which has become mandatory to compensate financial dislocations created by the criminals who used capitalism to their singular advantage, while knowingly destroying or undermining the lives of millions, nay tens of millions of common citizens, here and elsewhere. Further, if the federal government gains major stakes in financial institutions and corporations in general we will be evolving towards communism, which I hope most of us realize doesn’t work due to internal inefficiencies caused by lack of incentive to improve.

Have we been presented any sensible paths to solution of our economic problems at all? No. All of the hoopla about bailouts to restore the credit markets and putting people back to work with national infrastructure/public works projects has one glaring, lethal fault. If you have to recapture the money via increased income taxes then how do you stimulate people with too little income already to spend us back to prosperity? Increased taxes will have the direct effect of ensuring that we do not bounce back from this … well, it is a depression not a recession as you will surely understand as we experience job losses in 2009 and beyond. But if you have to create "funny" money and you can’t tax your way back to a balanced budget and no federal deficit then all that can happen is to fail to recover the "funny" money and to endure the resulting major decline in the value of the dollar. That is really ugly.

I simply have to ask one question aimed at the greedy manufacturing businesses and amoral financial institutions … How could you be so unbelievably stupid as to pee into your own soup? Another compound question must be aimed at our past and present political leaders … How is it that you have failed to address overall population limits including demographics and "out of control" entitlement programs, absolute control of health care costs and provision of very high quality education for all citizens, while spending hundreds of billions on illegal wars, yet not on national infrastructure or development of alternative energy? To whom, pray tell, are all of you responsible?

Various "fixes" have begun, re. bailouts, and they will continue to happen, all of which require the creation of "funny" money and something ridiculous called "oversight" from the federal government. The price to be paid for that series of actions, if our government is even somewhat fiscally responsible, will be significantly increased income and property and sales taxes at federal and state levels, plus utterly incompetent attempts to manage that which assigned government people will ruin. They do not begin to understand how to run a business, or why strong controls exercised by them, i.e. those ignorant of what is essential in specific businesses, inhibit growth and the implementation of new ideas. You don’t manage the business from a federal level; you seek out, remove and imprison dishonest/amoral executives!

Let me tell you in advance, with complete certainty, what will happen as a result of having a "car czar" to accompany the bailout of General Motors, Ford and Chrysler. In short, the car czar will destroy the negative financial impact of union negotiations from the past. Automobile worker wages and benefits will be severely reduced as a matter of law, with absolutely no recourse to strike. This will be justified as the only way to make our automobile industries competitive with ones like Toyota. In fact, it is just one more stunt designed to undermine the financial compensation of laborers with comfortable jobs, by using emergency powers that will be granted under law. That may fix out of balance wages and benefits but it will not fix the more important underlying problem discussed in the next paragraph. (Here is a postscript … just days after I wrote the above paragraph the Congress pressed exactly for wage and benefit concessions from the United AutoWorkers, who refused, so the Congress refused to pass a $15 billion bailout bill. Ahhh … this is so easy! But a bailout will occur and so will the wage and benefit concessions. That is a guarantee from me to you.)

The big three bailout will also wipe the slate clean for all of the miserably bad design and quality decisions made by the big three automobile executives in the past twenty years that were in fact the real reason the USA automobile companies failed. They put profit ahead of quality. They covered unnecessary cost increases with higher prices. Such things granted in the past to the United AutoWorkers union should never have been allowed to occur. Strikes should have been allowed to shut down the businesses until the unions caved in to common sense. Instead, both the management fools and the union fools tacitly agreed to screw the general public with the higher costs. It didn’t work, did it? Toyota is Numero Uno now, and they have honestly earned that position.

The criminals in financial organizations and corporations who committed the destructive acts that have destroyed our economy will get the bailout monies and the common citizens will probably have to pay for it. What this action will accomplish in a positive direction is highly questionable, for there is no reason to trust the forward judgment of the very organizations that demonstrated the massively destructive poor judgment that lead to our present state. I wonder how many people might rightfully compare the planned massive debt increase to borrowing ever larger amounts of money from a Mafia shylock after failing to be able to pay for a previous loan from that same shylock? That process leads invariably to disaster.

Having a government promote the bailouts even with partial takeovers and promised oversight lets the common people know where they stand. It isn’t pretty, and the result will be measured in apathy and lack of respect for the law and the political process. Stealing more from the victims, via taxes and/or declining value of the dollar is inherently wrong and can lead to later willingness on the part of the victims to follow any charismatic leader who promises to set things straight. This can and likely will happen because the bailouts and follow up actions will not improve the job market or even maintain it in diminished state for any significant length of time. Utter lack of respect shown in one direction, government and business to the people, will in fact result in utter lack of respect shown in the other direction. So should it be. Unfortunately this downstream disaster will make us vulnerable to extreme solutions such as Hitler provided to post WWI Germany. Is that the only way out? Gee, wasn’t the Nazi political doctrine also called National Socialism? By what means other than war of conquest does one pay, long term, for the cost of that type of "program?"

An accompanying disaster from the bailouts and planned public works projects will be massive inflation due to the devaluing of the dollar, for the market will be flooded with "funny" money. Hmmm … that also reminds me of the inflation in pre-Nazi, post-WWI Germany. This will utterly destroy the financial security of honest people who have diligently saved over many years to have a secure retirement. Their savings will not inflate as the dollar loses purchasing power. The only honest way to compensate that grossly unfair situation would be to have the federal government compensate all people with savings accounts with annual supplements to counter the real effect of inflation, above and beyond what was earned at low interest via those savings vehicles. In short, the fixes are simply an anesthetic Band-Aid covering a life threatening infection. They are absolutely not a cure. They will create far more serious problems than they will solve, and the common citizens will experience a very serious decline in standard of living with no view towards a better time in the future.

So much for the "problem statement." Now it is time to stand back and look at what has happened from an historical perspective.

To understand exactly where we are and where we are headed we first have to know where we have been looking at earlier times in history. That may sound stupid in terms of transportation but it is valid in terms of the evolution of human society. Well, lets get on with it. A brief history lesson re. Western civilization is in order to set the stage for evolutionary conclusions and later discussion. I apologize for not coming directly to the conclusions and implications. Perhaps they will occur to you before the fact as you read.

I begin by asking you to imagine an economy based on the structure of feudalism in the early Middle Ages in Europe. What characteristics would comprise that economy? For starters, all significant wealth would be in the hands of kings, or nobles given land grants by the king in return for economic and military service. The remainder of the population would serve in a variety of capacities, with a variety of levels of income, mostly in barter, from many serfs, servants and foot soldiers to a few physicians, artisans and military leaders. None of the lesser people could own property, but they were granted the use of housing and property and in some instances food based on their presumed relative value to the king or nobleman. Wealth would be generated by agriculture/animal husbandry and by highly limited trade, but quite often by conquest. It would be a life almost identical to slavery except for the royalty, talented artisans and other highly skilled contributors.

One might think of feudal systems as very ingrown, exceptionally slow growing in technology, extremely poor in general education and consisting of an uncomfortable, brutal and short life for most of the people. The primary characteristic was wealth and power aggregation, with little regard for the general population, and with growth limits or conquest results determined by the physical resources and imagination, or lack thereof, of the various members of royalty or the noblemen. Life was perceived by the leaders to be a zero sum game. Creation of wealth on a large scale, with involvement of the common people as an integral part and indeed as beneficiaries, was not conceived within that environment.

Now let us move on to later times. Starting conveniently with the Battle of Hastings, and then considering Prince John’s consternation later with the Magna Carta, early European monarchies developed, changed internally and changed via conquest and later intermarriage, which also improved commerce across countries. The Renaissance period began in Italy and spread across Europe, bringing with it increased trade and better education. Gutenburg invented the printing press and thus education of the general population gradually broadened. Technology in travel, particularly ocean travel, helped expand monarchy influence globally. Direct plunder of gold by Spain from Central and South America was a monarch approved and facilitated way of increasing national wealth. Later colonialism in India, South Africa, the Americas, the Far East and the many pacific islands became an essential way to improve wealth within the various European countries that had developed sea power. Of course, colonialism also directly created slave classes and destroyed or undermined stable cultures. Given a large landmass with too few laborers, slavery was established in what would later become the USA. One might think of potentially large wealth from commerce as the only reason for the introduction of slavery into the 13 colonies, especially in the southern regions for agriculture.

Perhaps the most negative aspect of European countries using sea power was the inhuman treatment of native populations all over the world. Europeans brought with them diseases that killed anywhere from 10 percent to 80 percent of the indigenous populations. Forced acceptance of Christianity was accompanied by unbelievable cruelty and killing was common. Indigenous populations were forced into slavery and rape and killing of babies was entertainment. To digress for a minute, the internal, unspoken issue that affected the conquerors, which is the same issue that has been with us since the beginning of recorded history, was that indigenous populations were considered to be subhuman and thus expendable in every way. This asinine egotism is still with us today, and the stronger people with any mental advantage often turn their lust to conquer and achieve immense wealth and power inward to take unfair advantage of the weakest people in our own populations. Our current economic disaster is a prime example. This is the root reason why excess accumulation of wealth and power must be terminated in all of our societies. Those who are both strong and amoral will always hurt or destroy the weaker people. Now we will return to the history overview.

All in all, the distribution of power and creation of wealth expanded greatly over what existed in the Middle Ages, via commerce. There developed a merchant class with significant financial resources, starting about the time of the Renaissance. Also, banking was established and that provided early capitalization of enterprises that prior to banking could happen only with the interest and goodwill of a monarch or a nobleman. Excepting Rome and a few other Mediterranean area cities prior to the Middle Ages, there wasn’t much in the way of cities in the Western world until the Renaissance period. You might think of the Renaissance as the true beginning of city and other government formations that are still represented today, along with all the attendant advantages and disadvantages. Other than the merchant class, artisans/crafts/guilds and some land ownership for agricultural development, there was little change in the life or fate of the common citizens. They were only somewhat better off than their Middle Ages ancestors, and at times that could be questioned with events like the Plague, which could not have happened with severity without urban development.

Colonies that became strong due to internal development and major natural resources, especially the 13 British colonies in North America, became ripe for revolution. There was a significant opportunity to create a new country with an independent economy simply because England lacked the sea power and manpower to quash a move towards independence. The American Revolution was going to be an obvious success because the colonies were too strong and too well developed. England couldn’t protect its interests over the great distance of the Atlantic Ocean. Lack of military and transportation technology is what operated in the best interests of the colonies, which is rather interesting when considered in terms of the present time. Development and application of military and transportation technology alone make impossible the environment available to the colonies that allowed the American Revolution to succeed. Can any protectorate do that today? Can any small nation successfully resist the economic and/or military forces of one or more of the few very large and powerful nations? Does terrorism really stop the onslaught of the more powerful nations to take whatever they want? No, no and no.

Undeveloped areas of the world that remain today are essentially uninhabitable in terms of agriculture and/or other physical considerations like unpleasant climate. There is no New World to explore, conquer and develop, at least on this planet. Desirable land acquisition is a zero sum game. The world has become a small and interconnected community, operating from an economic paradigm that is a superset of anything that existed before the middle of the twentieth century. Basically, global wars brought about the changes. What started as old-fashioned conquest with WWI and WWII evolved into vastly expanded global trade and financial development, e.g. the World Bank. The essential event, e.g. Bretton Woods, was the creation of a global financial system with vastly increased trade even before the end of WWII. The remaining problem of competing ideologies, democracy and communism, was a temporary blip in world evolution, though there was great fear for a time that global nuclear war would destroy us. Has that changed? If we suffer a prolonged global depression, will extreme nationalism or ideological differences or disgust with unending poverty lead to civil war, international war, nuclear, conventional or biologic? Will communism prevail due to the unbelievable stupidity of latter day capitalists and the puppet governments they created via campaign contributions and other direct and indirect compensation to politicians?

I believe that a new global economic paradigm and governmental paradigm will be mandatory to avoid war, both civil and between nations. What form this might take will be covered later. For now, know that we are neck deep in economic interconnectivity, such that major displacement from the economic development planned and executed in the last fifty plus years of the twentieth century will result in chaos. To be blunt, the nations of the world are not connected by any principle of government or business ethics that would simulate the relationships of the 50 states of the USA to each other or to the USA federal government. We are not globally organized or otherwise prepared for economic meltdown, and we have no sensible path being pursued, regardless of the publicized actions by the banks to lower interest rates or of the governments to bail out businesses to stimulate economic growth. There is no established rescue plan, nor was the need for one even conceived. That, my friend, is real trouble brewing right now. What will happen if one or a few countries see the potential to take over global commerce to the detriment of all the other countries? Who will respond to global need when local citizens are ready to burn everything in sight? Will NAFTA, APEC and all the other trade agreements mean anything at all?

To see the proof of the above thought, consider the very recent mass rioting in Greece, presumably due to the police shooting a teenager. Frankly, that attribution is absurd. Behind all major violent historical revolution situations which seemed to happen without major cause what we find is some small but important incendiary event that coalesces the anger of the general population about numerous serious grievances, or which gives an overly ambitious government an excuse to declare war to achieve greater power, e.g. 9/11. I seem to recall something early in our history called the "Boston Tea Party" and also the killing of a few colonists at Lexington. Rest assured that the anger about the dead teenager in Greece is but a tiny part of the reasons for rioting. Expect to see a lot of civil unrest in the next few years if quality of life diminishes significantly for many in the USA and elsewhere, for there is a breaking point for each of us, in which our behavior for survival, which includes destroying our apparent enemies, becomes essential. We will destroy and kill rather than sit idly by and starve or freeze. On that you can depend.

Now we will return to the general backdrop of history and the development and evolution of government and business. The USA had a brief (a bit more than 100 years) romance with something called representative democracy in the USA, before it was effectively and permanently perverted during 1896, the year the Supreme Court did not halt the plan to make corporations have the same rights as individuals. The problem, of course, is that corporations don’t die like individuals and have their wealth redistributed. Corporate wealth can and does amass to become overwhelming in its impact on society. That was a death sentence to true representative democracy as the definition changed at a practical level from representing the populace to representing only the wealthiest of the populace.

Representative democracy was originally expected, along with the accompanying capitalism, to serve the best interests of the citizens, and to create economic growth based on ability and willingness to work. Given our vast and undeveloped natural resources and land and provision of some capital, how could we not develop into a strong nation? Hmmm … it really did appear to work for a while, didn’t it? The USA was an undeveloped country rich in natural resources, and at a practical level protected from effective external assault due to oceans and weak neighboring countries … a perfect environment for a society to expand. Consider the industrial revolution, and the societal impact of the earlier transcontinental railroad, the telegraph and the telephone. Think about the massive improvements to agriculture via technology.

But what happened in our evolution to allow potential and then real economic disaster? Did we not experience a Great Depression back in the 1930’s? What were the most relevant causes of that debacle? Where are we now? What has repeated since the last Depression to bring us to our present disastrous state? What new practices were allowed to develop to bring us to our economic knees now? But reading between the lines the more important question is: What happened to our representative democracy? And a much deeper and more fundamental question is: Doesn’t the extreme aggregation of wealth and power lead to loss of quality of life for the common citizen, and later for almost everyone due to greed and hunger for power? Have we been on an undeniable stepwise path to return to feudalism via corporate and financial institution oligarchy? Is there something missing in the common citizens that makes them unworthy of respect and suitable only for exploitation? You best think about that last one in terms of quality of purpose and numbers and ability to contribute to an advanced technological society.

Why, pray tell, did I write Destiny starting over twelve years ago to uncover and discuss real cause and effect in human history? I did it to point the way towards a healthy evolution of humanity. I outlined the path, the method and major societal changes to help avoid the type of disaster we are now experiencing. But no one in power, or even in institutions of higher learning, showed any interest in dialogue surrounding Destiny definitions, concepts and plans. They were/are hiding from reality and I was/am right on target. The price for ignoring the truth, as we are seeing right now, is to repeat the worst parts of human history, ad nauseam.

Before I continue I want to relate the title of this article to the current reality of the disaster created by uncontrolled capitalism. The demise of a cancer is always certain, for it kills the host, and thus starves. Rather stupid, isn’t it?

Now lets move on to answer the host of earlier questions and to point out what we have to do going forward in time to avoid repetition of our current economic disaster.

This article continues in the follow up document: Demise of a Cancer Part Two