Thursday, November 17, 2011

Conservatives all think they are David Koch, David Koch knows better the way a shark knows he's not a halibut

It was a little odd that the price of gold had that big rebound after the large drop in price caused by big hedge funds selling gold and other assets in September to meet margin calls. We now know that it was caused by unprecedented buying of bullion by so-called emerging market countries’ central banks. This news caused gold to drop 3% today.

This will likely put the total amount of gold purchased this year in excess of the record set 40 years ago after Nixon ended the Bretton Woods Agreement. Named after a hotel in New Hampshire known for its Alpine skiing, this agreement was put in place in 1944 as the Allies looked toward the aftermath of WWII. It fixed the price of gold at $32/oz and the US pledged to back world trade using a USD that could be converted to gold at this fixed price by any government.

While this approach had its good points, the real reason for doing it was to allow the big Wall Street banks to horn in on international banking previously dominated by Great Britain. You see, FDR had forced the Brits to turn over their gold reserves to pay for the War, and Bretton Woods made the USD the new world currency instead of the Pound Sterling. Oil was also required to be traded in USD and the US was the only big exporter.

This plan worked pretty well until the early 70s when all those dollars thatNixon had been spending on the Vietnam war started to inflate the USD and the Brits, among others, started demanding gold by the hundreds of tons. Nixon closed the gold window and inflation really took off. By then the US was for the first time ever a net importer of oil, although by today’s standards the trade deficit from oil was inconsequential. Still, the oil companies were able to create an artificial shortage and drive up the price drastically. This allowed the big companies in all industries to muscle out the smaller competitors who saw their own capital eroded by inflation. The big companies could sell corporate bonds.

President Carter started drinking the Maggie Thatcher kool-aid about the “deregulation” of basic industries. This really meant the slow death of unions which were blamed for the stag-flation of the 70s. It really was from the printing of money that was then put in the hands of big banks and corporations to fund the mergers and acquisitions craze under the new “deregulation” wisdom.

Reagan didn’t start the War on the Middle Class; he just made it into a Holy Crusade. Bigger was better, merging companies was more efficient, factories should be moved to lower wage states and that would supposedly make goods cheaper eliminating 90% of the farmers would make food cheaper. Everyone was enamored with the Lifestyles of the Rich and Famous, and Reagan made them think this was within their reach. These were just a few of the conservative talking points of the time. None of them were new, but for the first time middle class Americans (even Democrats) started to actually believe them when coming from the Great Communicator.  They didn’t realize it, but the New Deal was slowly being dismantled around them.

Reagan used massive government spending to hide much of the economic damage, his strategy doubled the National Debt his first term and doubled it again in his second. Consumer credit went from just a way to buy a house to the way people paid for everything. They didn’t notice that their kids were only getting half pay and slowly it got to where everybody was getting half pay.

Well not everybody; the One Percent saw their incomes skyrocket and never stop going up. But more importantly, they now control the bulk of American wealth. More over, to quote David Koch when asked why he would steal oil from Native American wells, replied on tape, “I want what I’m entitled to: everything”.  This sense of entitlement is not an unusual belief among the One Percent. Rank and file Republicans don’t disagree with this either as they think they are the same as David Koch. David Koch knows better. www.prairie2.com

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