The Morning After 1

This one came After my GIC speech in 2007 about US Politics 1980-2997

World Economy: Gloom and Doom, or Blue Skies Ahead
Web Sites worth looking at: :www.chomsky.info http://www.michaelmoore.com http://www.howardzinn.org

Since the World Trade Organization and the treaty that invented it, the Global Agreement on Tariffs and Trade 2 (GATT 2), global pressures have been brought to bear that have pushed the value of labor lower and lower. This gives multi-national corporations more and more power to make profits, and under the GATT 2 Treaty, great gobs of money have been made at the expense of labor.

Corporate abuses abound. In Vietnam, since the 80s, factory workers, often women, get paid the equivalent of 14 cents per hour (Time Magazine) to make plastic toys! Those toys are used as giveaways in children’s meals at Burger King and McDonald’s, to name two, and the toys promote movies that are not only aimed at children, but full of propaganda that promotes the “American Way,” which might be acceptable if 1) the movies themselves weren’t so packed with sugar-coated lies, and 2) the women in Vietnam were making more money than the cost of getting to work plus one bowl of rice per day.

Our global economy takes on the specter of forced wage-slavery when one considers the reason Vietnam was put into the mess it is in today: the war that the United States mounted in an attempt to “liberate” Vietnam from the evil communists in the north. In reality, 80% of the United States’ bombs were dropped on South Vietnam, and the imperialist war between the United States and China that had started in Korea, simply spread to Vietnam, with Russia joining in at times, thus turning a war profit as well.
John F. Kennedy did not want the U.S. to be involved in Vietnam. The war profiteers had him killed.
The United States and China are still in a struggle to see who will control human and natural resources throughout the world. This struggle DOES in fact, affect the economies of smaller countries, and the most glaring example is the United States’ illegal war in Iraq.

When George W. Bush took office the average price of a gallon of 87 octane gasoline in the United States was $1.39. It now sits at $3.49. The reason this has happened is that when Saddam Hussein controlled the oil in Iraq, he pumped it out in order to pay off the debt he had from fighting the Iraq-Iran War in the middle of the 1980s. In fact, he pumped it out so successfully, that he was causing the price of oil to be very low. Thus, the United States used Hussein’s involvement in the attempted genocide of the Kurds, and his subsequent attack on Kuwait as an excuse for Desert Storm, a so-called war of airplanes and tanks against men with small arms and sticks. That war also saw the United States drop spent-uranium coated bombs. Those bombs are an intricate part of our world economy, as they caused newborns to develop cancer at an alarming rate. Most Non-Governmental Organizations agree that over one million unnecessary deaths occurred during the time that the U.S and its allies around the world put economic sanctions on Iraq. Those sanctions allowed a small amount of Iraqi oil to be sold. Oil prices went up, and U.S. domestic oil production could turn a profit again. Public money into private profit via war.

But wait, now that we control Iraqi oil, which is the type of high quality oil needed to be refined into gasoline, shouldn’t the President and his cronies help support the U.S. economy by dumping oil on the market, thus lowering the price of gasoline, and putting more money in the pockets of the U.S. workers? This would allow those who still have jobs to buy products OTHER than gas for their cars, thus helping ALL the countries that sell goods in the U.S. make a better profit.

The answer has been a resounding NO. Bush, and his Republican philosophical equals (my rating is dullard here) would much rather see higher oil prices, because this way they can extract a few dollars back form the Chinese, who are quickly gobbling up all the spare dollars the world has to offer.

This cat-and-mouse game, in which China is blackmailed into lending the U.S. money, even though the U.S. is so sunk in debt that no responsible entity, country, bank, or investment advisor would ever have the temerity to suggest buying U.S. bonds, is now responsible for bringing the world economy to the brink of ruin.

On March 6, 2006, Iran sold 30 Million Barrels of oil to China for Euros. It was the first sizable trade of oil for Euros in history. On March 8th, 2006 Condoleezza Rice, our venerable Secretary of State, made a speech stating that the United States believed Iran was capable of building nuclear weapons. Smart listeners will recall that it was a pack of lies about Saddam Hussein’s Weapons of Mass Destruction that was used to sell the Iraq war. Economy-watchers feared that the Rice speech of 2006 signaled a run-up to all-out war with Iran. War in Iran would threaten China’s oil supply, and could cause World War III.

If the United States were to print up dollars and pay off its debt to China, there would be so many dollars floating around, that the currency would have no value. Likewise, if oil starts trading in Euros rather than dollars, the dollar has no value, because everyone knows about our debt problem by now. War is the reason the U.S. is in such debt. If our economy fails, everyone else goes down with us. In order to prevent an economic meltdown I predict World War III. World War III would be a political decision. The U.S. is politically set up to accommodate this, should it be necessary to avert economic collapse. It would not be the first time the United States used foreign war to defeat economic problems at home.

Since the United States Government, its consumer borrowers and its corporate borrowers now owe just over $17,000,000,000,000,000 (that’s trillion) dollars to domestic and foreign creditors, isn’t it insane to think that we would spend more money on a very large war? But war is the quickest way to turn public money (borrowed or taxed from the workers) into private profit. (This number has soared since Oct.2007)

Indeed, anyone who buys U.S. treasury bonds is supporting the slaughter of innocent women and children just so American oil companies can make more money. Yet, China, Saudi Arabia, Japan, Germany, Holland, and many individual and institutional investors around the world keep buying up these tainted, immoral and foul investment instruments. Continuing to feed money to a country already drowning in debt is ridiculous on the face of it, but let’s look closer.

The United States, if you count consumer debt, mortgages on homes, corporate debt and governmental borrowing, takes loans of $1.6 Billion per day. With the Iraq war already costing $17 Billion per month, one can imagine a war that spread into Iran costing $30-40 Billion per month, easily. Why? Because Iraq had a measly 10,000 soldiers when we attacked, and, six years later, we still haven’t won. Iran has 280,000 soldiers, a well-equipped air force and hundreds of anti-aircraft missile sites throughout its sizeable land mass. But, I believe Mr. Bush and his junta are after the Iranian oil for two reasons: they need the world to continue to trade oil for Dollars, not Euros, and by controlling Iranian oil, the United States would control nearly 40% of the oil China imports. Bush sees the need for a trump card against China because of the multitude of ways China already controls the United States. The day Rice made her comments about Iran, thus beating the war drum, one Euro cost $1.19. A recent quote (Korean Times, March 15-16, 2008) has the Euro costing $1.56. This separation of the Euro and the Dollar has dire consequences for Europe in the short term, and the United States in the long term. The reason the Euro is worth more is that somebody, somewhere is causing this separation in order to benefit the U.S. Somebody with more economic clout than all of Europe combined. That somebody is probably going by the name of Saudi Arabia. Or Saudi Arabia plus U.S. institutional investors who keep widening the Euro-Dollar gap, thus squeezing Europe’s profits, thus making U.S. investments still somewhat attractive. Thanks to sub-prime loans, US Debt, and squeezed profits due to higher energy costs, the U.S. stock market, along with many others is poised to crash. More on that subject later. (see

Note that the Won is somehow losing value against the dollar, while the Dollar sinks like a rock against all other major and minor currencies. Canadians are jumping for joy, as, instead of $1.40 in Canadian money to buy a U.S. Dollar, they could, for a little while recently, get a U.S. dollar for, dig this, 97 cents! Yes indeed, for a short time there, the Canadian dollar was worth more than the greenback. You’ll hear more about the Won/Dollar relationship later too.

So, as multi-national companies in Europe are reeling due to the profits they can no longer extract out of the U.S., smaller European businesses, like hotels, restaurants, tour busses, churches that make you pay to light up a painting, museums, coffee shops, tourist attractions, beer pubs, whiskey bars, marijuana dens, and whore houses are all suffering because Americans are simply not going to be around at an exchange rate of $1.56 per Euro. That would be a $12.00 cup of coffee in Paris, or a $200 train ride from Frankfurt to Berlin. No thanks.

The old method of protecting American laborers (tariffs) has been traded for a new method of terrorizing foreigners into continuing to lend us money. Before the North American Free Trade Agreement, and the second Global Agreement on Tariffs and Trade (GATT 2) taxes were levied on all goods coming into the United States from countries that paid laborers less. Thus, a broom manufacturer in Mexico that could make a broom for 50 cents was taxed to the extent that the American broom manufacturer in Ohio could still compete, even though his broom cost $2.00 to manufacture. Thus, a tariff (import tax) of $1.50 per broom was put onto the Mexican manufacturer so that American labor could still have a job, and not be undercut by those willing to work so hard for so little.

The idea to scrap these tariffs made labor leaders and members of the Democratic party very upset, because lowering or abolishing these tariffs would mean many Americans would lose there jobs. Thus, any time a Republican brought up the idea of NAFTA, the idea was shot down in congress immediately. In the election of 1992, Bill Clinton, a Republican in Democrats clothing, pushed the NAFTA idea as a way for laborers in the United States to make more money. He said (he knew it was a fat lie) that when Mexicans made more money, we could sell more goods to Mexico, thus creating more American jobs.

He somehow got the U.S. labor vote, and a lot of conservative Democrats voted for him. Plenty of Republicans were not upset when he won. After all, he had stolen all their ideas in order to win, and with a Democrat pushing NAFTA, maybe, just maybe, it would pass. Clinton then went about handing out political favors, job projects and other perks to Democratic lawmakers who, once they had their own pockets sufficiently lined, voted for NAFTA. Once the jobs moved away, Clinton reduced government help for poor people with a very draconian Welfare Reform Act that has caused U.S. Prisons to overflow.

When NAFTA passed, currency traders cut the value of the Mexican Peso almost in half within a week. It went from 5 to 9 Pesos to buy a U.S. dollar. That made Mexican labor so much CHEPAER than it already was for American industrialists to take advantage of. It was no coincidence that the devaluation of the Mexican Peso happened so quickly after NAFTA passed. Immediately, two sub-groups of American industry starting moving factories to Mexico. One was the group that could no longer pass strict pollution laws in California and Colorado, the other was any company that wanted to make a bigger profit by using cheaper labor. This included companies like General Motors, which had heavy products to move, and for whom setting up shop in China for the U.S. market was not feasible due to higher transportation costs.

The area known as the Maquilladoras was booming with new industry. Mexicans flocked to the area for a chance to earn between $1.00 and $3.00 per hour, but other socio-economic problems sprung up. As Altha Cravey points out in “The Working Women of the Maquilladoras” Mexican workers in these factories live in dormitories that resemble single-sex barracks. If a woman becomes pregnant she is fired. If a couple starts dating openly, they are both fired. Worst of all, the pollution in this zone is horrific. Thus, anencephaly, a condition in which a baby is born dead, due to having no brain, has skyrocketed to levels 2000 times greater than the rest of the world. These workers are never raised out of poverty, and, except for goods made in China and sold at Wal-Mart, are never going to be buying anything that increases the profits of any U.S. company. So, U.S. companies that used to pay a living wage, say $12 to $30 per hour in the U.S., now had workers who worked hard, and for longer hours, and at $1 to $3 per hour.

In a similar, yet even-more-stunning sequence of totalitarian capitalism, Fleet Bank and JP Morgan Bank managed to team up to PURCHASE the central bank of Argentina. Yes, they bought it from the Argentine government, in 2003. Argentina was the site of MANY bad loans those banks had made, and they wanted to get their money back out of there somehow. At the time, Argentina was undergoing an economic meltdown, and the value of the Argentine Peso was dropping rapidly. Thus, any loans made to Argentina would be paid back in Pesos so valueless that the banks would lose a lot of money, even if the loans were paid back.

So, after they bought the central bank of Argentina, they got their friends at the International Monetary Fund and World Bank to put pressure on the Argentine government by saying that unless the government put into effect “austerity” measures, the IMF and World Bank would no longer lend them any money. These austerity measures meant that Argentina could not spend its way into a better economy the way Ronald Reagan had in the United States in the 1980s. Indeed, the IMF demanded that Argentina CUT BACK on government support of poor and unemployed people. And for this, Argentina would be paid back with a Peso that traded one-for-one with the U.S. dollar. But, honestly folks, did this currency trading breakthrough help any of the unemployed Argentines?
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It also meant that Argentina’s economy worsened quicker. In the end, many cities faced 70% unemployment, and that’s when the currency traders went to work, and revalued the Peso at one-to-one with the U.S. Dollar. With a peso so valuable, how could the U.S. profit? Well, because the Argentine unemployed were willing to work for so little. President Bush then pushed for the Free Trade Agreement of the Americas. This meant that American industries in Argentina could bring their products back into the United States without tariffs. Thus, the profits made in Argentina, to this day, are massive. So, through currency manipulation, war, and holding foreign economies blackmail by forcing their countries to continue to lend us money, the United States is playing a very severe game of RISK. And the RISK is that one day these other economic zones in the world will not care about what happens to the United States. They won’t care how much money they can make in the United States, and, they will cut us off: not only refusing to lend us more money, but also selling the bonds they already own. Boy, you wouldn’t want to be the second or third country to start selling U.S. bonds once that market collapses! It’s well within the bounds of history to foresee the U.S. Treasury Bond market collapsing in a time frame of two or three days. The only remaining question is, WHICH two or three days.

In 2006 South Korea thought about changing its reserve money from Dollars to Euros. After all, Iran had started selling oil for Euros. The New York Stock Exchange dropped 600 points the day this was announced. Many phone calls and meetings were put together to stop the Korean Central Bank from changing its Dollars into Euros. Korea, smartly realized that the American national debt would, at some point, make the Dollar worthless, or very less valuable than it is now. Thus, an orderly change from Dollars to Euros, while the dollar was still worth something made sense.

South Korea holds the fifth largest amount of Dollars in the world. Only China, Saudi Arabia, Japan and England hold more. If South Korea sold its dollars to buy Euros, the dollar would go down and the Euro would go up. Well, South Korea may not have sold dollars and bought Euros, but the dollar continues to go down and the Euro is going up anyway. The price of gold has gone up from $280 to $970. This indicates that many investors don’t have faith in ANY currency.

How then is the Won losing value against the U.S. Dollar? One business administration student of mine at Chonnam National University suggested that investors, large and small, are cashing in their Won-based investments to run to the safety of U.S. Treasury Bills, and they must have dollars in order to buy them. Thus, Won were being sold and dollars bought, in order to purchase U.S. Treasury Bonds. I hope, for the sake of Korea, that he is wrong. My belief is that the central bank of Korea is pushing the dollar up in value in order to save the profits of Korean multi-nationals who do business in the United States. The Korean Central Bank has the power to do this, because Korea still has so many US dollars.

The Korean dependency on foreign oil, rice and water is counterbalanced by profits made by large corporations. Should those corporations falter, many Koreans would starve, were it not for the reserves of dollars the Korean Central Bank has. But, if the dollar loses value, those holdings will also be valueless.

If things look bad for the U.S. economy vis-à-vis Korea, imagine the giant bag of poop the Chinese have been handed. The U.S. and Chinese economies are linked, nay welded together in so many ways, that, in order to keep the two economies afloat, China lends back to the U.S. many of the Dollars it extracts by selling products at Wal-Mart, etcetera. So, Trillions of dollars worth of those soon-to-be-worthless U.S. Treasury Bonds are owned by China, because they don’t want the U.S. economy to fail. If the U.S. economy fails, the otherwise rich “communist” leaders who own shares in the factories, or run the prison labor, or help build the dams that give Chinese farmers electricity they never wanted or needed would become poor quickly. The Chinese aren’t just lending our government money, they’re also scooping up billions of dollars worth of our credit card debt, corporate debt and (ha ha) sub-prime housing mortgages.

Any economic historian (I wrote a 30-page paper about the causes of the U.S. Great Depression in 1985) will remind you, these days, of the 1923 German Mark fiasco, and 1930 hyperinflation that hit the Yuan in China. Back then, the approximate cost of, say, a loaf of bread, went from $1.00 to $300,000 in Germany, and from $1.00 to $400,000 in China. In these circumstances, even the richest man was brought to begging. A quick glimpse at the U.S. trade deficit, national, consumer, and corporate debt load, sub-prime lending practices (who was the idiot that thought up this scheme?), soaring commodities prices, in part, or in whole, due to the soaring price of oil, finds us on the brink of world-wide economic collapse. The declining value of the dollar DIRECTLY causes oil prices to go up, in addition to the accelerating price due to demand outstripping supply. This in turn exacerbates the United States’ debt, which we are NOT going to be able to pay off ANY TIME SOON. You can see that there is very little room left for an expanding Gross Domestic Product in the United States. The main reason is that any and all taxes are being taken up to pay back the interest on money we already owe, leaving little left for domestic issues.

This is the bag of doo-doo I refer to, that China is now holding. Bear-Stearns, the second-oldest investment banking firm in the United States went belly-up a few weeks ago. The stock went from $38 to $2 per share when it was learned that the company, in a foolishly greedy and stupid move, failed to sell off its sub-prime loans, and was hoping to reap huge profits from the bad loans by keeping them for themselves. They held these terrible loans even in the face of Countrywide, Thornburg and many other mortgage lending firms biting the dust in 2007 and earlier in 2008. Even Citigroup, the fourth largest bank in the United States, is spinning off its home-mortgage division in order to save the rest of the bank. I sure wouldn’t buy shares in the home mortgage division of Citigroup, as its main purpose for this spin-off is to have a place for the bank to dump its losses. Short that stock on day one, if you’re a trader.

Bear-Stearns was bought up by JP Morgan thanks to a whopper of a loan from the Federal Reserve. Never since the great Depression has the Federal Reserve Bank had to step in to buy a bank to keep it from failing. Had Bear-Stearns been allowed to simply fold, the ripple effect of defaulted loans would have sunk the entire United States Banking industry in less than a month. OK, so who on earth thought up these loans to people who could never afford to pay them back? Well, greedy bankers did. These loans kept the U.S. housing market humming along at massive profits, while consumers were lured into buying mansions they could not afford because the first three years were of monthly payments were kept ridiculously low. An example would be a mortgage loan that cost only $700 per month to pay back in the first three years, and then jumped to $2000 per month for years four and five, and then to $4500 per month for the next 25 years. This, on a million dollar home, and to a borrower who could barely afford the $700 per month in the first place, and who showed NO evidence of income in order to get the loan. This had a chance of working out when home prices kept soaring, but now that 2000 families PER DAY are losing their homes in the United States, house prices are dropping like a rock.

Ah, but many banks did NOT hang on to these pitiful loans. They bundled them into billion-dollar securities and sold them to China. Yes, China, the same country that lends our government hundreds of millions of dollars per day, and lends our corporations tens of millions of dollars per day, and buys up our stinking, rotten, no-good credit card debt, now also owns a good hunk of the American houses that are hard to sell because they were just foreclosed upon by CHINESE BANKS. Not only are the Chinese going to fail to make a profit from the interest gained by borrowers paying the loans back, they also paid MORE than the value of the homes to get the loans, because a loan of $1 million at 6% interest would pay back over $2 million in a 30-year stretch. Now that these homes are impossible to sell, China is out the $1.3 million profit, for which they probably paid about $1.2 million (paying $1.2 million for a 30 year mortgage of $1 million is actually a good deal if the housing market is strong) they also won’t be able to get anywhere near $1 million for the house they now own, having kicked out its residents. Thus the same bankers who have convinced China to continue to loan us money, also sold Chinese investors these bundled house loans, which, any day now, will be worth even less, as the U.S. housing market continues its freefall.

Since so many employees of Bear-Stearns, General Motors, IBM, Ford, Eastman Kodak, Xerox, Citigroup, Thornburg, Countrywide Mortgage, Chrysler, Northern Telecom, Corning, Enron, US Steel, Northrop-Grumman, Proctor & Gamble, A T & T, Cooper-Lufkin, and others have been fired, once their jobs moved overseas, or simply due to mismanagement, who on earth is going to buy these homes?

So, as wages stay stable or decline (stagnant) and price go up (inflate) we have stagflation. Stagflation hurts the middle class, lower middle class and poor the hardest. These workers have already seen all their jobs disappear to overseas cheaper labor, so that even in the United States many people are willing to work for $6.00 per hour at McDonalds, rather than starve. These are women and men who used to make $20.00 per hour or more. They too have already lost their homes and are now renting small apartments, or, they can’t find work at all and are living in the streets. What can such a debt-laden U.S. government do for them? So far, jail has been one answer. That’s because we spend all our borrowed money on war.

War, war, war, the quickest way to turn public money into private profit is war. That’s why John F. Kennedy was shot. He wanted the U.S. OUT of Vietnam. Well, that would have cut off a massive profit machine, thus, that profit machine got rid of him. Dick Cheney was the president and CEO of a company called Halliburton. It is in the business of protecting oil reserves around the world. In other words, it’s a cover for the C.I.A. Cheney himself was responsible for an accounting fraud even larger than that at Enron while C.E.O of Halliburton and that fraud had seen the stock of that company go from $56 to $20. Just as he was about to be put into jail for this, he was elected Vice President, and as such, he set about a way for Halliburton to make up, in profit, that which he had cooked up on its accounting books. What was his method? Have Halliburton and its subsidiaries be the main contracting and logistics firm in the Iraq war. Bingo, Bango, Bongo, no more accounting problems or jail time for Cheney. OOOOPS, 1.3 million innocent Iraqis dead, and another 2 million as refugees, but still, at least Cheney wasn’t in trouble.

But the rest of us are. Anyone who eats should be aware that twenty (20) percent of the world’s fuel is spent moving food. Hence, wheat prices have doubled, fruit prices have tripled, and those heavy watermelons, well, the price has quadrupled: sad day for Suba lovers! Have wages gone up? Not for those laid off from Ford and GM, I can assure you. And not for the average South Korean worker either.

My thesis: Either the U.S. pays off its debt, and retires Treasury Bonds, or the weight of the debt will cause deflation. According to the economic forum of Duke University and UNC, which meets quarterly, fully 22% of the money we borrow is used to PAY THE INTEREST on the money we already owe! Deflation is what hit the U.S. during its Great Depression from 1929 to 1941. Of course paying off our debt by printing $100 notes and crating them up for shipment to all the foreign creditors we owe would cause a type of hyperinflation because THERE WOULD BE SO MANY DOLLARS FLOATING AROUND. Thus, both scenarios (do nothing, and watch our debt grow, which has been in practice since 1980) or pay off the debt quickly (what I refer to as “hyper-inflation AHOY!”) are losing scenarios.

How then can there be a case for blue skies ahead? Well, just as Ronald Reagan pointed out, we GROW our way out of our debt. Ah yes, we grow our way out of it. Uh, let’s see, we can’t grow our way out of it through the manufacturing sector because we’ve moved most of that sector to countries that offer cheap human labor (note the man who worked building Disney toys in Shanghai, at about $2.00 per DAY, working a 14-16 hour day. He complained about never getting any overtime pay, and Disney said “we cannot possibly supervise all of our vendor-manufacturers because we have 4000 of them all over the world.” Ooops, bad Public relations, as Disney has about 25 cents in those $20.00 toys we buy, and 18 of those cents are the price of MOVING the toy!) But less people are going to Disneyland now too!

OK we could “expand our way out of the debt” by erasing the trade deficit. Oops, that may be hard to do, since our own companies are the ones responsible for 40%, give-or-take, of the trade deficit. (When manufacturing moves overseas, the products then have to move back to the U.S., and count as a trade deficit since the wages are paid to FOREIGN workers).

Aha, we could expand our service sector (sending people out to companies to teach their secretaries how to use Microsoft Vista) But those phone centers that answer questions about your credit card bill, have, for the most part already been shipped to cheaper labor in India, or U.S. jails. Yup, the man talking to you about your credit card bill, after pulling it up on his computer may NOT be from India but could be from a U.S. prison (MasterCard and Visa both use U.S. prisoners for cheap labor). All but about six teams of IBM’s programmers are now based in India. Kevin Johnson (the drummer in Skinny Atlas, the last band I played in) is the leader of the VERY top team that “puts out fires” for IBM’s TOP corporate clients. His team remains in the U.S., but he’s got six years left until he qualifies for a full retirement, and he’s worried that after five years, he’ll get the can, so IBM can save money on his pension, which would be cut in half unless he makes it to the finish line. He already pulls an 80 to100-hour week to help his chances.

So, gains in manufacturing or service, or trade deficit erasure are pretty much ruled out as ways to grow our way out of the debt, because they are unrealistic. That leaves inventing new products everyone will love (see the I-Pod and I-Phone from Apple) as the United States’ best way to clear this “economic blip” currently referred to as a recession, and more accurately described as stagflation. Again, stagflation hits the middle class, lower middle class, working poor, fixed income retirees and impoverished the hardest. Those groups combine to make up 85% of the United States. Thus, because people in those groups are already paying huge utility bills for their rising energy costs, link-ups to the internet, and cell phones, we cannot expect them to be buying too many more $400 I-Phones in the near future, because, if they drive to work, or eat, then their cost-of-living has soared lately, while their quality-of-life has plummeted.

Therefore, because our national debt has soared from $one trillion in 1980 to somewhere in the $teens of trillions now, and because the price of food has doubled, and the price of transportation has tripled in the last seven years alone, stagflation will see to it that even innovative products that “everyone will love” are going to have to be products that retail for $1.00 or less, like the quality $1.00 DVD movies you can buy in the bargain movie bin at Wal-Mart.

This can be proven by the fact that food, shelter and clothing are the three basic necessities, and, when it comes to clothing, no one is buying much anymore. Just ask Macy’s or even Wal-Mart, or the owners of malls whose stores can’t pay the rent anymore. In the shelter department there is an even larger collapse, in three areas: the number of foreclosures on family homes is now OVER 2000 per day (including Saturday, Sunday and Holidays). The number of people qualifying to own a home is deceasing due to tightening lending standards, lay-offs, lack of good jobs, and lack of vocational job-training programs, because, the Reagan administration and the U.S. Congress in the 1980s saw fit to end federal support of vocational schools. At no time during the 1929-1941 U.S. depression did Americans face foreclosures at the rate of 2000 per day. It was never that bad then. Still for reasons that are complex, the U.S. stock market has declined in an orderly way, rather than a full-blown crash.

So, if food (the price of most foods have doubled), clothing and shelter are MORE than some Americans can afford, uh, who is going to buy these new innovative products that will “help us grow our way out of our debt?” Maybe the top 15% of the money earner/owners will. But maybe they won’t Maybe they too are trying to find ways to save money now.

AH, but, Doug, what about the Blue Skies Ahead part of your thesis? By blue skies, I had a double meaning. It means that a major downfall could be prevented (or at least postponed) via war, and also refers to bluer skies once the oil runs out entirely. So the blue skies can be a profit center. Not in the peaceful ways, like airlines, or Boeing, or Airbus profits, but in the old fashioned way: war. Note that the blue skies have opened up for U.S. Air force support for the first time during “Shock and Awe,” in Iraq, the last week in March, 2008.It is a tragic irony that the war hit this new level of destruction during Easter.

Long ago it was discovered that the quickest way to turn public money into private profit is war. Oil tycoon John D. Rockefeller set the standard with a triple dip into the Russian Revolution. Indeed, he 1) sold arms to Czar Nicholas, 2) leant money to the Bolsheviks and 3) sold arms to the Bolsheviks with the money he leant them. The triple dip occurred when the winning side was also the group who had to borrow money. Thus, JDR also earned interest on the money he leant the Bolsheviks because THEY WON. Recently a double-dip occurred in the middle 1980s when the United States sold arms to both sides of the Iran-Iraq war (a necessary precursor to our being able to control the oil in that region).

Thus, the blue skies full of fighter jets over Iraq are a warning that the U.S. may soon attack Iran, no matter who wins the next Presidential election.

The other blue skies are the ones that will occur when the oil finally does run out. Again, take the BRIC countries, Brazil, Russia, India and China, and add their demand to the already stressed oil supply, and it is not a stretch to imagine the earth running out of oil inside 100 years. Although alternative energies like Wind and Solar power continue to be refined, we are not using enough of these power sources and the technology needs to be made more efficient. Plus, neither is excellent as a solution for moving products form one area of the world (where cheap labor is cheapest) to another area of the world (where rich people are the richest).

Thus, when the oil runs out, the earth runs the very strong risk of being able to support only the same number of humans it supported before the oil economy took over. Two billion. If the earth is about to move from nine billion people back to two billion people, certain strategies come to mind.

The way I’m trying to save my family is to clear out of the stock market and put 50% of our money into farm land, and 50% into money market funds that are extremely liquid, in case the U.S. Dollar DOES go into hyperinflation. If deflation, hyperinflation or oil price pressures continue to drive 3-10% annual inflation, growing your own food will be the only salvation.

South Korea is a very dependent country. It imports rice and fresh water at a huge rate. The business section of the March 15-16 Korean times (albeit a propagandist rag) points out the upward pressures on commodities, like steel, and food, are not likely to abate, and Brazil is poised to sell its iron ore to steel companies everywhere, thus continuing the march toward a more-developed world. This means a world that sucks more energy. Much of Korea’s energy needs, including all the oil used here, is imported. If Korean companies can’t turn a profit in the United States, the ability to buy the rice and water needed to sustain its people will evaporate. Outside of wind and solar power, all energy causes very bad pollution. Nuclear energy being the worst polluter, as the radioactive spent fuel rods remain radioactive for thousands of years, not to mention the specter of disasters like Three Mile Island and Chernobyl.

Some communities in the United States, like Ithaca, New York, and Chapel Hill, North Carolina have found a way to ensure that their economies stay strong, and as free as possible from the influence of macroeconomic malaise. They print their own currencies. It’s perfectly legal in the United States, and these “Plentys” as they are called in Chapel Hill, are accepted by local merchants at par, or equal to dollars. Since the only place to GET the currency and USE the currency is in Chapel Hill, all the “Plenty’s” stay within the community to help support local farmers and local shop owners. None can be used to help support the milt-nationals that have brought us to the precipice of worldwide economic collapse, because their local outlets refuse to take the currency.

Does anyone know if Gwangju is allowed, under Korean law, to print its own currency? If so, and if enough merchants accepted them at an equal value to Won, all the money those merchants make from shoppers using this local currency would have to be spent by those local merchants HERE IN GWANGJU. Thus, in some small way, the multinational companies from the United States, Seoul Beijing, Shanghai, Tokyo and elsewhere would not be able to suck Won from Gwangju to line their already fat and blackened wallets in cities that are rich beyond belief. If this local currency movement were able to get 40% of the merchants to accept the local currency, the average Gwangju worker would be a lot better off, as her hard-earned money that she buy things with would have to stay here to buy other things in Gwangju, thus stopping the drain of money away from the city. Eventually, if Chapel Hill is a good example, more and more merchants would accept this local money.

As economic growth slows due to energy sucking up profits, which blue sky will prevail, the blue skies filled with war planes, or the blue skies over farmers, working hard to preserve human life even after the oil runs out? My university students are always asking: what is the best major to make sure I get a great job and a wonderful life. Even though I teach English, these days my answer is AGRICULTURE. As the oil economy grinds to its death, the happiest, wealthiest human beings will be the farmers, just as it was 250 years ago. They will be stocked full of human wealth, not monetary wealth. Their children will be part of the few who survive the end of the oil economy. The blue sky will switch from corporate greed to food production, and humanity will be better for it. We already have proof in countries like New Zealand.

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Comments
One Response to “The Morning After 1”
  1. dougstuber says:

    How scary making predictions can be. This old piece (hence its inclusion in the “morning after” section) was way back at a time when house foreclosures in the US were at 2000 per day. Wow, it’s up to 9000 per day now, and yet no one is screaming “DEPRESSION!” Workers who have their homes foreclosed, may also find it hard to ever find work again. So those who lose their homes BECAUSE they’ve lost their jobs (which we should differentiate form those who lost their homes due to greed on the part of themselves AND the banks due to sub-prime loan trickery) face the specter of NOT being employed, because a bad credit rating usually means you can’t get a good job in the US.

    The part that scalds me, I mean rips my flesh daily, is that the US TAXPAYER has already paid the banks trillions in BAILOUT money that, in effect, PAYS for the entire price of the homes people have lost. The homeowner’s have moved in with their children or parents, the banks are bailed out at nearly 100%, and then, and this is the KICKER, the banks sell the homes (in Florida, often at an 80% discount to the TAX value) and reap another 20% PROFIT, while hammering the value of real estate in the surrounding neighborhoods.

    OK the banks could have made more if Johnny Paycheck had found a way to quadruple his income within the five interest-only years of his mortgage….but when he or she didn’t, the banks got BAILED OUT, and now the banks really don’t care what they sell the foreclosed homes for as long as they GET OUT!

    Has anyone been told how, when, where, and with what interest rate ADDED, the banks will be paying back the taxpayers for these bailouts? Indeed they HAVE NOT. It means the banks may have struck a deal, through which they do not have to pay ANY of the money back. Well, of course the taxpayers (not those mega-rich who move money to the Cayman Islands, like Goldman Sachs did) but those who live paycheck to paycheck, shopping at lower and lower priced food stores, replacing fruit and vegetables with Velveeta and bologna will be PAYING BACK THESE BAILOUTS for what, a century? But even that payback by taxpayers for the benefit of the stinking rich may NOT BE POSSBILE under the current debt load of the US Government.

    This is so ludicrous as to be humorous.

    The same “bankers” who took all the money now do not give a hoot about hammering the value of EVERYONE’S home, which, since a home is almost everyone largest investment, means that we’re headed down a very steep and slippery “slope” that may soon feel like a freefall sans parachute, caused by the greedy one percent at the top who will, by God, REMAIN AT THE TOP of what is left of the US economy. IN a similar banking scenario in Sweden (1998), the bankers WENT TO JAIL.

    Oh god, this is to long a reply, and will end up Morning After #3….hold on…

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