Wednesday, November 25, 2009

Eaten by the Bear

Fears that the USD would strengthen and cause the worldwide market bubble to burst came to naught as the USD met a grizzly end early today. The Dollar was surging early on comments by the Fed Chairman Ben Bernanke that the Fed was committed to a strong Dollar. This didn’t last long as the Dollar was dragged out into the Canadian forest and eaten by a bear. This was the result of Russia announcing that it will be dumping an unspecified amount of its 400 billion in USD reserves in favor of the Canadian Dollar.

The CanD jumped up about a nickel on the news and the Dollar plunged to a new low against gold and other metals. It also fell to a sixteen month low against the Euro but keep in mind this is also a paper currency and not immune to its own collapse given the damage that Wall Street has done to the world economy.

Unemployment claims dropped last week but the Fed Chairman made it clear that unemployment will remain high. Good news for capitalists as they can continue to drive down wages. Bad news for anybody in the real economy. It is expected that there will be a 140,000 jobs lost on the next monthly report. This is a smaller number than we’ve been seeing if it is true but by no means good news.

We need 125,000 new jobs per month just to keep up with population growth. So even if the government numbers are accurate, we are still losing more than a quarter million jobs every month and they are just plain gone. To put this in real terms this is like losing every job in a good sized American city each month. This damage will catch up with us soon, no matter how big the bonuses on Wall Street.

Weakening the Dollar is a back door way of putting tariffs on imports and eliminating the debt. Germany did this to pay off its WWI reparations and it is a risky game. Fascists like Prescott Bush have a way of inserting themselves into these schemes and they can produce unforeseen consequences.


Bakari said...

Hi, I found out about your site through the Malloy show. I really want to understand the economy better, because I really do think paper currency and of course the unfair distribution of money and resources are the primary causes of the world's problem. But I don't simply know enough about how the economy works. I think it would be great if and Malloy could share economics 101 resources for people to read and study. Can you suggest a good book? I've read some Karl Marx, and lots of commentary like yours, but I need get a solid grounding on why the dollar is used to represent the economy, when the long run it does work for most people.

prairie2 said...

Paper currency isn't a bad thing in itself, it's that we have criminals in charge of printing it. Gold is not a simple solution but is a good standard for exchange rates. Like we had until Nixon took us off it. That's why you have these wild swings in international markets. Marx could see the problems, but he didn't have any of the solutions. Prof. Ravi Batra of SMU has written several books that are highly reccomended. I haven't read them but I've heard him talk and he is very good. Thom Hartman has a couple of books that give the history of all the corruption and would give you a good understanding of what has been going on.

Bakari said...

But why do we need paper currency when it doesn't seem to really represent the real value or resources and services, and thus it can be easily printed, manipulated, and exploited. People do some very evil things in the name of acquiring money. We certainly could do everything we need to do without paper currency. Not sure how we work out the distribution of goods and services without the use of money, but I do think the concept of currency is outdated. Finally, wasn’t Marx's solution to problem: socialism, leading to communism? I'll check out Prof. Batra.

Athanasor said...

Bakari: Don't confuse a medium of exchange with an economic system and don't confuse an economic system with a political system.

One of the big problems we have in this country is too many people falsely conflate democracy and capitalism.

Bakari said...

I not sure how you can separate the two, especially since economic agendas, policies, and so forth are supported and pushed by political policies and power structures. We have just seen our own government bail out the capitalist financial system in this country. So there's no separation between the two. Marx and Engles developed that analysis very clearly.

Right now I'm reading an interview with Dr. Ravi Batra, and in general I agree with him that corporate mergers need to be broken up, taxes need to be raised on the rich, and wages for the poor and working class need to be raised.

But that doesn't answer my question of why we depend on this sort of economic arrangement? It doesn't seem like a very sustainable system when companies are compelled to produce and people are compelled to buy and go in debt just to keep the "economy growing." It sounds like a contradiction. But like I said, I'm not as literate about economics as I should be, so maybe I'm missing something.

Bakari said...

Another question: Shouldn't there be some limit to growth? I mean, why must production always increase in order for the world economy to thrive?

prairie2 said...

Progressive taxes fix many of those problems and sensible government regulation will take care of the rest. We had that from 1935 until Reagan, Bush I, Clinton and Bush II tore it all apart. The Republicans want to do away with government for the same reason cancer wants to do away with the immune system.

No. Cal. Refugee said...

I think Bakari raises a very important issue regarding growth, one that is seldom, if ever, addressed. Proponents of Capitalism speak of 'growth' and 'expansion' as anything but unqualified good. Just today I read someone bemoaning the fact that birth rates in Europe are falling, even below 'replacement level.'

Even among those who are not Capitalism cheerleaders seem to either ignore or avoid the implications of a continually expanding economy and population. I hear people bemoaning the increasing levels of CO2, and the melting icecaps, etc., and yet does anybody really believe that human population can expand indefinitely without taking its toll on the environment, eventually strangling the planet in a blanket of humanity?

Sadly, the human capacity for denial is more than enough to ignore the problem until reality decides to teach us humans a lesson the hard way.

Even Al Gore says that the cure to overpopulation is reduce infant mortality. Sorry Al, but I know lots of first world people who have big families. If Al can't face reality, I have no hope for the great unwashed masses. As the cliche goes... 'this is not going to end well.'

Bakari said...

Yeah, you know, like most people in this country, I'm not very literate when it comes to economics, but common sense (or uncommon sense!) tells me that growth doesn't equal progress. It seems like "growth" is used to reap profits and create more debt. As Refugee points out above, how far do we take "growth" and what does it mean.

I just discovered looks like a really good documentary on YouTube called the The Money Masters. I'm segment 9 (of 22) and the producers lay out well about about much control the private banks have over nations. It appears have been produced several years before the current crisis, but it seems also really predict or describe the current crisis.

And again I ask, of praire2, how can the government really be effective with just progressive taxes? Even if the rich pay more, that doesn't mean the people are really more empowered. There's a contradiction inherent in wealth when it comes about at that the cost of the working class and the environment.

Anyway, this is an interesting discussion.

Andis said...

I as well have often wondered why no one ever questions the expectation of perpetual profit growth in business. I would guess that too many of the options that would come up in that conversation are simply unspeakable. By that i mean they are just concepts most people wont or can't wrap there minds around.

There are so many things we Americans just wont talk about, and capitalism is defiantly one of them.

prairie2 said...

The founders not only suppressed corporations, having just fought a bloody war to free themselves from the British East India Company(1 in 60 Americans died) they also enacted severe estate taxes to keep there from being dynastic wealth. The founders were middle class, the rich all left after the war.

No. Cal. Refugee said...

Prairie2, what is your view on 'growth' as an end in itself? I understand your point about progressive taxation and dynastic wealth, but do you envision some sort of mechanism to limit endless expansion of economic activity, and/or human population? I can't see how progressive taxation or even a 100% inheritance tax solves the problem.

prairie2 said...

China, Russia and Europe have negative population growth. The US did until Bush opened the flood gates on imigration. Economic growth is OK if it is managed. The whole concept of GDP as a barometer of growth is stupid and was invented by the cancer cells to fool the immune system. Running the world is complicated but not as complicated as it's made to seem with organized crime in charge of it.

Bakari said...

prairie2“The founders not only suppressed corporations, having just fought a bloody war to free themselves from the British East India Company(1 in 60 Americans died) they also enacted severe estate taxes to keep there from being dynastic wealth. The founders were middle class, the rich all left after the war.”

Yeah, I'm discovering that this seems to be the case, especially as I was watching The Money Masters series on YouTube. The producers present how the founders really understood how the British aristocracy willed so much power, and how the distribution of money was antithetical to real democracy. I’m still trying to wrap my head around it.

Example: "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered." Thomas Jefferson

For so long, the history of slavery clouded my view of the Founders as nothing more than hypocritical slaver owners. But I see I’m going to have to broaden my reading of that period of history.

I also need to find out if there’s a website devoted to the rethinking of economics. Just like secularism and atheism is slowly but surely undermining ancient religious ideology, there needs to be the same understanding and challenge to backward economic ideas and systems that essentially enslave people to money and “perpetual growth“, as opposed to slowing “progress” down so that more and more people can actually live fuller lives. It’s a serious contradiction to have so much technological growth but see so much poverty and violence in this world.

Plus, as essential non-renewable resources increasingly diminish, nations will have to learn how to truly respect and help one another, rather than put economic greed ahead of survival under diminished resources. I’m still far from clear about how economics works, but I really do think there’s inherent contradictions within the traditional economic order, and the only way it can be addressed is that more and more people understand its underpinnings.

Unknown said...

What kind of "growth" are we talking about here?

I'm interested in the theory that says a company (whether corporation or not) has to make more profit quarter after quarter (or year after year).

Can't a company just keep making the same amount? Provide a set amount of goods or services, charge enough to cover expenses and give everyone who works there a comfortable living? Why is there supposed to be MORE profit so the company can turn out MORE stuff, so it can make MORE profit, etc. etc.

That's what I don't understand about the idea of "progress" and "growth."

No. Cal. Refugee said...


I agree with your idea that it SHOULD be enough to just keep doing what works. The 'system' as it really is is heavily tilted towards the big fish eating the small. To use a simple and overused example, Herb and Dee own a clothing store in downtown Centerville. Walmart opens a megastore. Walmart sells clothes for less than Herb and Dee can buy them from their distributor (for assorted reasons). Herb and Dee go out of business.

The playing field is not level between the big and the small. The Herb and Dee lobby does not exist. Walmart has lobbyists galore to make sure laws are written to help them eliminate competition. It's not an economic necessity to keep growing, but more of a political necessity. If you aren't big enough to get laws written, regulations enforced, etc. etc., you will be destroyed by those who are.

prairie2 said...

Much of what we take for granted about corporate growth is based on activities that were made illegal during FDR and de-criminalized by Reagan. Real growth has been replaced by predatory growth and they are running out of things to eat, hence the collapse. The "cancer" stage of unregulated capitalism as it were. What we had between 1933 and 1981 wasn't perfect, mostly because Republicans and any Democrats that they could corrupt kept poking holes in it.

Bakari said...

I know this sounds very naive, but for me it's no longer about small and larger businesses. It just seems like the need and use of money is the cause of so much turmoil and problems in the world today. Christopher Hitchens says that religion destroys everything, but I say it's money that destroys everything!

Everyone is constantly competing, lying, dying, stealing, deceiving, pimping and prostituting, killing, and outright ripping other people off in the name of money. And above all that, too many people must work way too hard for paper dollars whose value is nearly worthless in relationship to real goods and services. I mean, it’s not like we couldn’t produce the things we need without money. It’s just the way we go about doing it is the problem. Again, i know that sounds naive, but I feel the need to speak aloud here for bit. Prarie2, feel free to tell me you’ve heard enough already. lol

Bakari said...

“A world in which "all money is debt, but not all debt is money" is unsustainable, as debt and interest on debt grows faster than income and money with which to pay debt.

When a bank makes a loan to an individual, business, or government, the principal of the loan is created and added to the borrower's bank balance. However, the borrower has promised to repay the loan plus interest and no money was created with which to pay the interest. Therefore unless indebtedness continually grows it becomes impossible for all loans to be repaid as they come due.”

"A sustainable financial system is simply one which enables the real economy to be maintained decade after decade and century after century at its full employment potential without recurring inflation/over-indebtedness crises."

How Banks Create Money; Why We Can Never Get Out of Debt

This is a long article/pamphlet that I'm presently reading, and I think others might be interested in.

prairie2 said...

The comment on money creation and interest is an over simplification. A lot of "money" is created when business and even farmers sell on "credit" or even when you wait to get paid by your employer, they also create "money". Of course the bankers have been steadily eroding this practice in order solidify their control. Of course most of the "money" in circulation at the moment is not bearing any interest as the Fed has been giving away trillions.

Unknown said...

Bakari, I hear you.

There's a book I read about the difference between good money (even if it's paper) and the kind we have now. Unfortunately, I can't recall the reference at the moment. I'll work on it. Because you are definitely on to something.

Thank you P2 and Refugee. I'm getting a sense of the difference between natural growth and what we have. But some other questions come to mind.

Let me think some more.

Bakari said...

Rita, is the book you're referring to titled, “Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free ”, by Ellen Hodgson Brown. I did a google search on your words and came up with this book, which is on Amazon. It seems to point to what you're talking about.

Unknown said...


YES! That's the book I was thinking of.

I remember that later in the book she had some ideas that didn't resonate with me.

But her descriptions about how paper money can work FOR PEOPLE and not as a way to manipulate and gamble seemed reasonable. I think she had examples of when this kind of good system was actually used.

Thanks for saving me a sleepless night.

Bakari said...

And thank you for referring me to it. I was just reading reviews about it on Amazon. I'm seriously thinking about ordering it.

Prairie2, where's your Amazon associate link for this book? :)