Thursday, April 11, 2013

Thursday, April 11, 2013...Things to come



Thoughts expressed on the internet:

What happened economically because of the collapse of the Soviet Union and the rise of the high speed internet is that it made it possible for Western corporations (corporations in the United States, Europe) to arbitrage labor across national borders.
In other words, when the Soviets collapsed, it had a big impact on thinking in Communist China and Socialist India. Their response to the failure of the Soviet Union was to open their vast, underutilized labor to Western capital. So the corporations found out that they could produce for their home market offshore in India or China, dramatically drop the labor cost, and thereby dramatically increase the profits flowing in capital gains to shareholders and in performance bonuses to executives.
So the collapse of the Soviet Union began the arbitrage of of labor, and it ended up separating Americans from the production of the goods and services that they consume. The economy has been dead in the water ever since, and the Federal Reserve under Alan Greenspan tried to substitute - for the missing growth in consumer income in employment - consumer indebtedness. So we had the rise in consumer indebtedness, the real estate bubble, the various financial frauds, and the ongoing financial crisis as well as increasing unemployment.
The manufacturing goods were produced offshore and sent in. What the high speed internet allowed the corporations to do was to offshore the production of professional services, such as software engineering, information technology; and now, of course, research, design. They could hire people in India to do this work, and they could send it in on the high speed internet, and so we have seen the employment for Americans in rapidly growing fields such as software engineering and information technology simply dry up. The work is now done offshore and sent in on the internet. So the consequence of Soviet collapse was to destroy American manufacturing jobs, and to destroy professional service jobs that had always been the ladder of upward mobility for American university graduates.

"Don't look for a job that can be outsourced by the internet." Even radiologists are being outsourced.; so if you get an x-ray, they send the results to India to have a radiologist in India do it instead of an American doctor doing it.
It's certainly the case that innovation follows manufacturing. If you're not manufacturing things, you're out of touch, and you don't know what to innovate, or how to innovate. if you're not making things, you don't know what to innovate. You get out of touch with technologies. You become a Third World Country. We now see from all the surveys that increasingly, American corporations innovate outside the country where their offshore plants are.

So if the American manufacturing worker costs $22 an hour (with all the benefits, and so forth), and the Chinese at the time this started cost 25c an hour, you have an amazing labor cost difference. And so they look at this and they say: "Well, wow! We could really drop our cost of production by producing with this Chinese labor, because instead of twenty-five bucks an hour, it's twenty five cents." That's what we mean by labor arbitrage. They just say, "OK, we're not hiring these Americans, we're going to hire the Chinese." That's labor arbitrage. The job offshoring was undermining employment opportunities in the United States, and certainly had stopped the rise in consumer income.

The main function of globalism is to de-industrialize high-wage countries that are developed.
The other main result of globalism is to turn lesser developed countries that had viable agriculture and were self-sustaining, to turn them into monocultures; supplying like one crop for global markets, and then that makes them -- first of all, that destroys the economic-social systems there, and people now are dependent on food imports. The big farms, of course, haven't room for much of the population that used to be on sustainable farms. So globalism is a wrecking force of amazing power to wreck. It doesn't do anything good except for shareholders of big corporations and their managers, or chief executives.
So there's no longer - governments don't represent the people anymore. In Europe, they represent the very powerful private banks, and they're going to be sure they don't lose any money; so that shareholders in the banks are being made whole by, in the case of Cyprus, seizing some share of the bank deposits of depositors. And what they did in Greece, they cut wages and salaries, they cut pensions, they cut social services, they sold off public assets like water companies to private companies, who then doubled the price, and then that way the suppressed the living standards of the Greek people in order to pay off bankers, so that the shareholders of the banks didn't lose any money.

"The Right is correct that government power is the problem, and the Left is correct that private power is the problem. Therefore, whether power is located within the government or private sectors cannot reduce, constrain, or minimize power. " And you talked about how the Founding Fathers had a solution, that it didn't work, and now we've got accumulation of new dictatorial powers in the Executive Branch in the name of protecting us from terrorists, and with deregulation's creation of powerful corporations to big to fail.

the two political parties. But they're not necessarily identified with Right Wing and Left Wing. What happened to the Democrats was the offshoring of the manufacturing jobs destroyed the power of the labor unions and the ability to finance the Democratic party. See, the Democrats were financed by labor, the Republicans were financed by business, and so there was countervailing power. They could contain one another. Neither side could go too far away from some sort of balance. But when the unions lost all these manufacturing jobs, and former cities which were powerhouses in manufacturing just dried up and disappeared, the Democrats then had to go to the same sources of financing as the Republicans. So now, both parties are dependent on the same financing, and this then has made it easy for the corporations to control both parties!

What's happening though is that it's failing. It doesn't work for the industrial countries, it works for China, who gets all the offshored production, and so American GDP becomes Chinese GDP, and American jobs become Chinese jobs, and American consumer income becomes Chinese consumer income. What's happening is the balance of power in the world is shifting completely away from the West. It's washed up.
So, the more trade agreements that Obama and any President signs, they're basically accelerating the transition of power to China And India and other former third World countries, but they're the rising countries now - the BriC countries.
The Chinese manufacturing force is 112 million. The American force is Eleven million. Eleven!
Is it possible if we could find and elect a leader who said "My first step as the new President is to cancel these global trade agreements." Would that be possible, if they were able to stand up to all these different people?
It can't happen for the reason that right now it serves the interest for the power, so they're not going to overturn it. Now, when it becomes apparent that we've destroyed ourselves, you can't get the power back. You think the Chinese are going let you all of a sudden let you overcome this? No. They'll hold the upper hand. They're not going to say "OK, let's now destroy ourselves the way the Americans destroyed themselves." I think it's all over with for the West. I don't think they can come back, and so what we're going to be in is a period of transition in which the West becomes no longer the ruler of the universe. It will be slowly declining. In fact, the collapse could be sudden.

The dollar is one of the biggest bubbles in history. The Federal Reserve is creating over a trillion new dollars annually, but the demand for dollars is not rising by a trillion annually. And so, sooner or later, this has to affect the price of the dollar, that is, the exchange value. And we already see the important nations moving to decouple from the dollar.
We have the BriCs: this is China, Russia, Brazil, India, South Africa. Altogether now, that's probably about half the world's population. And it's probably half of the traded goods (laughs). And so they're setting up a system in which they settle their trade with one another in their own currencies. The dollar is no longer used as a reserve currency. They're setting up their own version of an IMF. They're just going to bypass all the Western institutions. We see in China and Asia the rise of an Asian currency bloc, which is being organized around the Chinese currency. We see deals with Japan and China to settle their trade with one another in their own currencies.
So the demand and use for the dollar is about to rapidly constrict. We'll have a situation where the Feds are not only creating a trillion new dollars more than the demand is growing, but the demand will be shrinking! And so the thing will blow up. And when the dollar bubble pops, so does the bond market bubble, the stock market bubble. We will have the biggest economic catastrophe in the history of the world, and there is no solution. The United States will go from being a so-called superpower to a nothing!
It could happen at any time. It's a perfect storm that the idiot policy makers have created because they don't serve the public interest, they serve a few rich bankers. The whole thing has been keyed toward protecting the banks that our deregulation policy allowed to get to big to fail. Not only that, but the public officials, the Secretary of the Treasury, the FED, the financial regulatory agency heads, they're all the former bankers themselves, all their proteges. You have a situation where the class that caused the crisis is running the solution, and the solution is to keep the banks from having any pain; what it does to the rest of us is not their concern.

Because the people running the policy are not individual rich people: they are the very large financial institutions. They may finance billionaires in some scheme a billionaire has, but the power is Goldman Sachs, JP Morgan Chase, Citibank, Bank of America. It's these financial institutions, they have financialized the economy. Industrial Capitalism is over and done with. We have Financial Capitalism, and what they do is, they organize a whole economy so that all the surplus is drawn off in interest paid to banks. You can see it happening in Greece, Spain, Italy, Ireland, Cypress and spreading into other countries of the world. One day, soon, it will happen in the United States.

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