Germans unhappy with the Euro

[rob]

You sound like your mom.

[j_b]

She did teach me to say thank you and please. She also taught me to stand up to nincompoops.

[Nitrox]

I LOL'd. You're a classic.

 

Since you claim to be so confident, why don't you take the assertions you make in the post I said was Glenn Beck's drivel and show us how it relates to the wikipedia entry. I'll be waiting, jackass.

 

No, if you have something to say with some merit then say so, otherwise I've already supported my position and will not further explain it to you.

 

 

[j_b]

Any minimally thinking person should realize that the wikipedia article you posted doesn't substantiate whatsoever your gratuitous assertions. I know that you are trolling for the lowest common denominator surfing these pages (what else could you hope for considering your dismal record and terrible logic) so Glenn Beck's fans just may agree with you.

[rob]

Greek cuisine is delicious. They should leverage that.

[olyclimber]

fuck i love greek salad. they really know how to make a salad.

[KaskadskyjKozak]

You're all douche nozzles.

 

In order for j_b to be a douche-nozzle, he would have had to have been inside an orifice, which I am certain he has never been.

 

Unless you mean an unused douch-nozzle, in which case, I concur.

[Nitrox]

Euro Breakup Talk Increases as Germany Loses Proxy

 

May 14 (Bloomberg) -- Romano Prodi recalls how he persuaded Germany to allow debt-swamped Italy into the euro: support our membership and we’ll buy your milk, he said.

 

When Prodi toured Germany’s agricultural heartland after becoming Italian leader in 1996, he pitched “a big milk pipeline from Bavaria,” pointing to a three-year, 40 percent plunge in the Italian lira that was hurting dairy sales. “To have Italy outside the euro, a huge quantity of exports from Germany would have been endangered,” Prodi, now 70, said.

 

Germany got the message, allowing entry rules to be bent to create a 16-nation market for its exporters. Now, German taxpayers are footing the bill for that permissiveness as Europe bails out divergent economies lashed to a single currency with little control over national taxes and spending.

 

The consequences are an 860 billion-euro ($1 trillion) bill for a debt binge led by Greece, sagging confidence in the European Central Bank’s independence and mounting speculation that a currency designed to last forever might break apart.

 

“You have the great problem of a potential disintegration of the euro,” former Federal Reserve Chairman Paul Volcker, 82, said yesterday in London. “The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”

 

German-led northern Europe, with its zeal for budget discipline, is attempting to fix the mistakes made by the euro’s founding fathers in the 1990s. It is squaring off against the governments of the south over who will control the euro and the ECB; whether the currency will be used to promote growth or squelch inflation, and ultimately, whether some countries should be disbarred from the monetary union.

 

European Club

 

What was conceived as a club for Europe’s strongest economies was expanded for political reasons, leaving the currency union with minimal powers to police deficit spending and no safety net for dealing with countries, like Greece, that veer toward default.

 

“There was no discussion of that at all, of a crisis mechanism,” said Niels Thygesen, a retired Copenhagen University economics professor who served on the 1989 group led by European Commission President Jacques Delors that mapped out the path to the euro. “It was believed that if countries adhered more or less to prudent budgetary policies, that would not or could not happen.”

 

Kohl’s Role

 

Former German Chancellor Helmut Kohl, seeing the euro as the capstone of Europe’s economic integration and Germany’s return to the European family after two world wars, opened the door to the deficit-prone southern European countries that the Bundesbank, haunted by the memory of hyper-inflation, wanted to keep out.

 

Returning from the December 1991 summit in Maastricht, the Netherlands, that kicked off the euro project, Kohl told the German parliament that he wanted “the greatest possible number of countries” in the euro. That gave Italy, Spain and Portugal the encouragement to meet the economic targets to join in 1999 and Greece to follow two years later.

 

Defenders of the German economic model knew the threat posed by countries such as Italy, whose budget deficit was 10.2 percent of gross domestic product in 1991, when they forced European leaders to set 3 percent as the limit for euro members.

 

“A well-known German financial leader told me: Fortunately for Germany, Austria is between Italy and Germany,” said Alfons Verplaetse, who oversaw the Belgian central bank from 1989 to 1999. The reckoning was that only Germany and its immediate neighbors would pass the economic tests, limiting the euro to a handful of countries, Verplaetse, 80, said.

 

Nobel Laureate

 

Today’s euro is far from what economists like Nobel laureate Robert Mundell call an “optimum currency area.” Gross domestic product per person ranges from 69,300 euros in Luxembourg to 18,100 euros in Slovakia, debt from 14.5 percent of GDP in Luxembourg to 115.8 percent in Italy, and unemployment from 4.1 percent in the Netherlands to 19.1 percent in Spain.

 

“A currency without a state is difficult to manage,” said former Italian Prime Minister Lamberto Dini, 79, who also served as the nation’s finance and foreign minister. “The decision to create a single currency in Europe was an eminently political decision. It was supposed to bring about greater European integration not only at an economic level, but at a political one.”

 

Europe’s multi-state structure leaves it without a U.S.- style federal tax and financial-transfer system to smooth discrepancies between richer and poorer regions. The EU’s budget, mostly for farm aid and infrastructure projects, represents barely 1 percent of the bloc’s GDP, compared with European national budgets that average 47 percent of GDP.

 

The Blueprint

 

Signs of a mismatch between strong and weak economies and a loose coordination of fiscal policies were noticeable in the earliest blueprint for a common currency.

 

“In view of the marked divergences that persist between member states in realizing the goal of growth and stability, there is a risk of surging disequilibriums unless economic policy can be harmonized,” Luxembourg Prime Minister Pierre Werner wrote in the 1970 report that introduced Europe’s first bid for a single money.

 

Four decades later, Werner’s prophecies are coming true, as euro-region governments prioritize domestic needs to pacify voters after the deepest recession in a half century. The EU Commission estimated May 5 that the overall economy will grow 0.9 percent in 2010, not enough to create jobs, after shrinking 4.1 percent in 2009. It predicts unemployment will climb to 10.3 percent in 2010 from 9.4 percent in 2009.

 

Euro Rejection?

 

German officials are already debating what was unthinkable to the euro’s architects: that a currency union designed in its founding treaty to be “irrevocable” might not be. Finance Minister Wolfgang Schaeuble said March 12 that expulsion from the euro may be the ultimate penalty for serial violators of debt rules.

 

Under current EU law, ejection is “legally next to impossible,” the ECB said in December. Changing the treaty requires unanimity among the EU’s 27 governments, so the euro’s current lineup -- likely to be joined by Estonia next year -- will have to find a way of making do.

 

Markets have rendered a mixed verdict on the euro’s resistance to the crisis. The currency’s decline below $1.24 for the first time since November 2008 from a record high of $1.60 in July 2008 still leaves it above the starting rate of $1.17. The euro is about 11 percent overvalued against the dollar, data compiled by Bloomberg of purchasing power parities show.

 

Maastricht Treaty

 

Greece’s ability to get into the euro illustrates what is wrong with Europe’s uncoordinated economic management. Greece, the EU’s poorest country at the time of Maastricht, set about cutting its budget deficit from 16.3 percent and persuading the Germans that it was serious about being fiscally prudent.

 

By 1996, with Greece’s deficit at 7.4 percent of GDP, Finance Minister Yannos Papantoniou was confident enough of making the grade that he pleaded for the euro’s paper money to feature the name “euro” in the Greek alphabet.

 

The German reaction wasn’t encouraging. Theo Waigel, Germany’s finance minister at the time, responded by saying he had “enough trouble in Germany trying to sell this idea of giving up the mark, and now you want me to put funny letters on it as well,” said Ruairi Quinn, then Irish finance minister, recalling the altercation at an April 1996 meeting in Verona, Italy. Waigel added that “it’s all irrelevant because you’re never going to qualify,” according to Quinn.

 

Greek Letters

 

The global economic boom of the late 1990s enabled Greece to meet the targets for deficits, debt, inflation, interest rates and currency stability. Greece joined the monetary union in 2001 and a year later, banknotes featuring generic architectural symbols and embossed with Greek lettering went into Europe-wide circulation.

 

Waigel started with a “very negative position,” said Papantoniou, 60, the Greek finance minister from 1994 to 2001. He responded to the German’s outburst in Verona by offering him “an appointment in two years’ time to check this out and you’ll change your mind.”

 

“Once we entered the euro, we forgot about the necessity of carrying on this structural effort and we now pay the price,” Papantoniou said. Waigel, now 71 and a lawyer at GSK Stockmann + Kollegen in Munich, wasn’t available to comment for this article.

 

What Societe Generale SA economist Dylan Grice dubs a “Greek tragedy” dates to 2004, when the new Conservative government of Costas Karamanlis accused its predecessor of fiddling the budget numbers to pass the euro test -- a charge Papantoniou denies. EU records now show that Greece has never brought its deficit under the limit.

 

‘Greek Drachma’

 

“Investors had always regarded the euro as a de jure German mark,” Louis Bacon, founder of the $15 billion hedge- fund firm Moore Capital Management LLC, wrote in an April 16 letter to investors who have made an annual return of 20.5 percent from his flagship fund during the past two decades. “It’s dawning on the world that it is becoming, de facto, a Greek drachma.”

 

Greece’s credit rating was cut to junk by Standard & Poor’s on April 27, making it the first euro member to lose its investment grade.

 

The nation’s slipping competitiveness was masked by an economic expansion buoyed by the euro-driven drop in bond yields to 3.23 percent in September 2005. Growth peaked at 5.9 percent in 2003, topping the euro zone that year. Unit labor costs that bounded ahead by as much as 10.2 percent in 2002 put Greece at a disadvantage to countries like Germany, where wages declined in 2004, 2005 and 2006.

 

‘New Odyssey’

 

Greece’s fiscal crisis was exposed after another change in government, from the conservatives back to the socialists last October. Prime Minister George Papandreou, elected on a promise of higher wages and benefits, is now on what he calls a “new Odyssey” that may end with the dismantling of the welfare state built by his father Andreas, Greek leader from 1981 to 1989 and 1993 to 1996.

 

Italy’s journey to the euro followed a similar script to Greece, from German opposition to reluctance to acceptance. Then the paths diverged. Italy kept its deficit under the limit five times in the euro’s first 11 years. Deficit-obsessed Germany has only done so six times.

 

Led by Prodi, Italy snuck under the deficit ceiling in 1997, the test year for the first group of euro aspirants, helped by a one-off “Eurotax” and a yen-denominated swap. Italy wasn’t alone in coming up with one-time savings and accounting dodges. France transferred pension funds from France Telecom SA to graze the 3 percent limit.

 

Bundesbank Bid

 

Even Waigel made an ill-fated bid to get the Bundesbank to boost the paper value of its currency reserves to reduce Germany’s debt.

 

Germany’s tight-money faction dictated the rules for the euro, yet it lost out when Waigel’s call for automatic sanctions on countries with deficit overruns was rejected by other governments in talks that culminated in Dublin in December 1996.

 

Prodi, who served two stints as Italian leader and ran the EU Commission from 1999 to 2004, said the “crisis isn’t unexpected. It came much later than I thought.”

 

The euro project is “half baked,” he said in an April 20 telephone interview. “You cannot have a monetary policy without coordination in fiscal and economic policy, because otherwise you will have problems.”

 

The budgetary lapses cloud EU efforts to quell Greece’s crisis and prevent a stampede by speculators against Portugal as well. Germany, for example, is again pressing for curbs on deficits as long as its own economy escapes closer oversight.

 

‘Fractious Mobilization’

 

Bickering over Greece, exacerbated by Germany overruling French opposition to making the International Monetary Fund part of a rescue, contributed to the euro’s slide this year against the dollar. Moody’s Investors Service cited the “fractious mobilization” of EU support as a reason why it cut Greece’s credit rating on April 22.

 

Spain, France and Germany have scoffed at a May 12 EU Commission proposal for more coordination of taxing and spending plans before they are voted on by national parliaments. The commission also urged more “expeditious” enforcement of the deficit rules, without calling for tougher fines on violators.

 

“The old idea that you discuss with peers your budgetary plans before they’re announced is very difficult to implement,” said Jean Pisani-Ferry, a Maastricht-era EU economic adviser who now runs the Bruegel research institute in Brussels. “It runs up against the politics.”

[mkporwit]

Uh oh, here comes jb's rant about how Bloomberg is also a Republican jack-booted thug...

[JayB]

Are you saying you didn't slam the Greeks like all the others conservative nitwits? you could have fooled me, jackass. You don't even have the courage to acknowledge what you said a few hours earlier, it is therefore no surprise you won't acknowledge your support for the conservative policies that took us the brink

 

 

Regressive alert at Der Spiegel!

 

http://www.spiegel.de/international/europe/0,1518,694263,00.html

[j_b]

Uh oh, here comes jb's rant about how Bloomberg is also a Republican jack-booted thug...

 

Why should I say that based on this article? It is certainly a one sided perspective (insofar Greece is one of Germany's major markets so they needed states like Greece and Italy to go into debt to buy their stuff and they were well aware of what was going on), and much of it I am not sure about (for perspective, the Euro was worth $0.83 ~10 years ago and it is said today that euro banks bet against the Euro likely because euro exporters wanted to see its value come down) but the article doesn't claim like regressive nitwits do that public sector employees and social programs are the cause of Greece's downfall.

[j_b]

Regressive alert at Der Spiegel!

 

yep, even across the pond the corporate media is singing the same neoliberal tune of "forget about widespread tax evasion, forget about widespread corruption, forget about your job being shipped to the land of little wage and no benefits, forget about the banksters and the financial collapse. Just think that you had it too good so far; now, just bend over".

[j_b]

Slouching Towards Neofeudalism

 

by Garrett Johnson

 

The financial crisis that grips our nation's states and cities has a malicious source, and Governor Tim Pawlenty recently named that source: public school teachers.

 

"It used to be that public employees were underpaid and over-benefited. Now they are over-benefited and overpaid compared to their private-sector counterparts."

 

The school teacher, the policeman, the firefighter - these are now the faces of what is wrong with America today. It doesn't matter that studies by the Bureau of Labor Statistics say otherwise, America can no longer afford their overpaid, middle-class salaries.

 

At least that is what the right-wing media is telling us. Tea party members also want to see a drastic pay cut for the same people who teach their children. A familiar comment on the internet is, "I took a pay cut last year. Why shouldn't they?"

 

This attitude goes beyond schadenfreude and goes straight to the crabs in a bucket mentality. Strangely enough this attitude of "if I can't have it, neither should you" only extends to working class people who live next door. For some reason none of the jealousy and malice is reserved for the people who actually broke the budgets of the states and cities, i.e. the people who deserve it.

 

If you really want to know why the cities and states are so broke, then you must first ask yourself where all the money went. Was the firefighter down the street from you buying vacation yachts for his tropical island? Probably not.

 

However, the guys on Wall Street who sold your school district, county, and state governments complicated financial derivative products are buying yachts for their tropical islands. Maybe we should start there instead.

 

Detroit Mayor Dave Bing is struggling to save his city from fiscal calamity. Unemployment is at a record 28% and rising, while home prices have plunged 39% since 2007. The 66-year-old Bing, a former NBA all-star with the Detroit Pistons who took office 10 months ago, faces a $300 million budget deficit--and few ways to make up the difference.

 

Against that bleak backdrop, Wall Street is squeezing one of America's weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS (UBS) and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city's credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That's precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

 

What most often happened is that Wall Street rating agencies, the same agencies implicated in corrupt business practices, downgraded the municipal bonds, thus turning the the financial deals into an albatross for broke cities, but a profitable one for Wall Street.

 

Detroit is hardly alone. No state in the union has been spared the backlash of a one-sided financial deal that transferred public wealth to the already wealthy. Wall Street is raking in huge amounts of money from our broke cities and states at the worst possible time. The SEIU did a study which shows the country's municipal governments losing $1.25 Billion just from these interest rate swap deals alone.

 

"Elected officials are simply no match for the investment banker that's selling the deal."

 

Yet in conservative political circles there is little blame directed at Wall Street. They would rather blame the guy picking up their garbage for his $45,000 a year wage, than they would denounce the investment banker who tricked their city government out of hundreds of millions of dollars. Can these people even do math?

 

The logic of this attitude reminds me of someone who drives all the way across town to "save" a couple nickles on gas, while blindly shoving thousands of dollars into their 401k that someone they've never meet on Wall Street manages. Matt Taibbi wrote about this phenomenon last year.

 

The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That's why even people like Beck's audience, who I'd wager are mostly lower-income people, can't imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over.

 

Taibbi describes it as a "peasant mentality". I agree. However, Taibbi doesn't take the logical next step and tells us what it all means - neofeudalism.

 

In 1958 John Kenneth Galbraith wrote The Affluent Society. It was a book far ahead of its time, and one of the first to use the term "neo-feudalism". It dared to question traditional attitudes towards economics, and for that it was hated and shunned by wealthy conservatives.

 

Inequality has been justified on many grounds, "principally noted for the absence of the most important reason, which is the simple unwillingness to give up what [the rich] have." Equality has been argued to lead to uniformity and monotony (the rich sponsor the arts and education), redistribution has a musty association with godless communism, and the original Ricardian defense was that the present system was ultimately inevitable, and any attempt to change it would only lead to short-run inefficiency which would make everybody worse off.

 

This attitude, that some amount of suffering is necessary in the current system, and that any major changes in it would be self-defeating, is what I call Sacrificing to the Volcano God. We have turned economics into a religion, where the mistakes are common, yet the fundamental assumptions it is based on is beyond question. Gaping flaws in logic are ignored, or even held up as unanswerable mysteries that laymen could never understand. When the Volcano God rains ash and lava upon us, it is because we angered the Volcano God with our sins of minimum wage laws, child labor laws, environmental regulations, and worker safety laws. More sacrifices are needed or the Volcano God will destroy us all.

 

The High Priests of Economics never explain exactly how these sacrifices will fix the economy, nor do they mention that the sins in question might be their own. Yet we still rush to offer up our children's futures through unpayable debts while never considering that there might be better alternatives.

 

"Jesus Christ is Free Trade, and Free Trade is Jesus Christ."

- Dr. Robert Browning

 

Like the Volcano God, nothing can stop globalization. There is no alternative.

Besides, globalization is good. They tell us that it creates jobs, and you are expected to believe them even while you watch all the factories in your town close down and get sent overseas.

 

"Outsourcing is just a new way of doing international trade."

- N. Gregory Mankiw, chairman of Bush's Council of Economic Advisors

 

This shouldn't surprise anyone. David Ricardo, legendary economist and free-trade proponent, explained how this dynamic worked nearly two centuries ago.

 

"If instead of growing our own corn... we discover a new market from which we can supply ourselves... at a cheaper price, wages will fall and profits rise. The fall in the price of agricultural produce reduces the wages, not only of the laborer employed in cultivating the soil, but also of all those employed in commerce or manufacture."

- David Ricardo, Des principes de l'economie politique et de l'impot, 1835

 

So you see, your wages are supposed to fall with free trade globalization. Those who worship the Volcano God knew this all along. They also knew that our manufacturing base was going to move south of the border when NAFTA was passed. They fail to differentiate between free trade and global labor arbitrage.

 

[...]

 

Neofeudalism is a concept in which government policies are designed to systematically increase the wealth gap between rich and poor while increasing the power of the rich over the poor. It's a party-neutral idea. There is no cabal pushing the plan, merely the sum effect of pressure from the wealthy elite.

 

Those policies can be seen today. Just look at the fact that earned income are taxed at a higher rate than unearned income, and the repeal of the inheritance tax.

 

Other ways are harder to measure but no less real, such as white collar criminals receiving slaps on the wrist, while the poor feel the full weight of the law. It's a system with two sets of rules, one for the rich another one for the poor, and that is the definition of neofeudalism.

 

Another manifestation of neofeudalism is the growing power of corporations, that leave the poor dependent on private interests more powerful than the government, a situation resembling traditional feudal society.

 

Currently the top 1% of society own 40% of the nation's wealth. The lower 50% of the nation have the mean assets worth less than $28,000. The richest 10% are worth, on average, 143 times that, or $3.976 million.

 

Despite this disparity, 80% of tea party members think that raising taxes on households making more than $250,000 to pay for universal health insurance is a bad idea. At the same time, 88% of tea party members think Obama, a president they despise, "favors the poor", and 73% think that "providing benefits to the poor encourages them to remain poor".

 

Noam Chomsky in Hegemony or Survival had this to say:

 

If working people depend on the stock market for their pensions, health care, and other means of survival, they have a stake in undermining their own interests: opposing wage increases, health and safety regulations, and other measures that might cut into profits that flow to the benefactors on whom they must rely, in a manner reminiscent of feudalism.

 

Neofeudalism isn't just about the powerful taking over everything. It's about conditioning the poor to accept their designated role in society, even fighting to defend the ability of the wealthy to exploit them. It requires working people to do things that are against their own interests, and nowhere is this more true than in our current economic system.

 

How is it that we have a politico-economic system in which the government's explicitly stated goal is to entice people to take out loans for houses and cars they don't even need? 150 million cars on the road and we must keep buying new ones? Millions of vacant housing units and we need to build new ones? Homes so full of Chinese junk that half of it goes into off-site storage, and we need to shop more? For whose benefit? Ever heard of debt-slavery? How about feudalism?

 

Here's an even better word: peonage. It always amazed and confused me how everyone in America is obsessed with their credit rating. It's almost as if people don't realize that credit equals debt. Debt is something that people have feared for thousands of years, because unlike Americans today, historically debt was always associated with another scary term - slavery. Debt bondage, indentured servitude, slavery, they all mean the same thing. Yet somehow the establishment has convinced us that the ability to "manage" our slavery is something to be proud of. They even have a rating system for it.

 

I'm not being facetious. Being heavily in debt means you don't have the freedom to quit your job. People who have lost their job are unable to move because the enormous debt tied to homes they can no longer afford.

 

Being tied to a piece of land is the definition of serfdom.

 

Every once in a while our love for the wealthy elite who are exploiting us wanes. When that happens the American people need to be distracted. Perhaps it is incompetent terrorists in caves in faraway lands. Or maybe its poor immigrants who want low-paying jobs. One way or another there will always be a scapegoat, and we will need to declare war on them. As Taibbi put it:

 

It's a classic peasant mentality: going into fits of groveling and bowing whenever the master's carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you're a peasant when you worship the very people who are right now, this minute, conning you and taking your shit. Whatever the master does, you're on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger.

 

http://www.huffingtonpost.com/garrett-johnson/slouching-towards-neofeud_b_568972.html

[JayB]

Regressive alert at Der Spiegel!

 

...you had it too good so far; now, just bend over".

 

Yup.

[JayB]

Slouching Towards Neofeudalism

 

by Garrett Johnson

 

The financial crisis that grips our nation's states and cities has a malicious source, and Governor Tim Pawlenty recently named that source: public school teachers.

 

"It used to be that public employees were underpaid and over-benefited. Now they are over-benefited and overpaid compared to their private-sector counterparts."

 

The school teacher, the policeman, the firefighter - these are now the faces of what is wrong with America today. It doesn't matter that studies by the Bureau of Labor Statistics say otherwise, America can no longer afford their overpaid, middle-class salaries.

 

At least that is what the right-wing media is telling us. Tea party members also want to see a drastic pay cut for the same people who teach their children. A familiar comment on the internet is, "I took a pay cut last year. Why shouldn't they?"

 

This attitude goes beyond schadenfreude and goes straight to the crabs in a bucket mentality. Strangely enough this attitude of "if I can't have it, neither should you" only extends to working class people who live next door. For some reason none of the jealousy and malice is reserved for the people who actually broke the budgets of the states and cities, i.e. the people who deserve it.

 

If you really want to know why the cities and states are so broke, then you must first ask yourself where all the money went. Was the firefighter down the street from you buying vacation yachts for his tropical island? Probably not.

 

However, the guys on Wall Street who sold your school district, county, and state governments complicated financial derivative products are buying yachts for their tropical islands. Maybe we should start there instead.

 

Detroit Mayor Dave Bing is struggling to save his city from fiscal calamity. Unemployment is at a record 28% and rising, while home prices have plunged 39% since 2007. The 66-year-old Bing, a former NBA all-star with the Detroit Pistons who took office 10 months ago, faces a $300 million budget deficit--and few ways to make up the difference.

 

Against that bleak backdrop, Wall Street is squeezing one of America's weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS (UBS) and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city's credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That's precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

 

What most often happened is that Wall Street rating agencies, the same agencies implicated in corrupt business practices, downgraded the municipal bonds, thus turning the the financial deals into an albatross for broke cities, but a profitable one for Wall Street.

 

Detroit is hardly alone. No state in the union has been spared the backlash of a one-sided financial deal that transferred public wealth to the already wealthy. Wall Street is raking in huge amounts of money from our broke cities and states at the worst possible time. The SEIU did a study which shows the country's municipal governments losing $1.25 Billion just from these interest rate swap deals alone.

 

"Elected officials are simply no match for the investment banker that's selling the deal."

 

Yet in conservative political circles there is little blame directed at Wall Street. They would rather blame the guy picking up their garbage for his $45,000 a year wage, than they would denounce the investment banker who tricked their city government out of hundreds of millions of dollars. Can these people even do math?

 

The logic of this attitude reminds me of someone who drives all the way across town to "save" a couple nickles on gas, while blindly shoving thousands of dollars into their 401k that someone they've never meet on Wall Street manages. Matt Taibbi wrote about this phenomenon last year.

 

The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That's why even people like Beck's audience, who I'd wager are mostly lower-income people, can't imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over.

 

Taibbi describes it as a "peasant mentality". I agree. However, Taibbi doesn't take the logical next step and tells us what it all means - neofeudalism.

 

In 1958 John Kenneth Galbraith wrote The Affluent Society. It was a book far ahead of its time, and one of the first to use the term "neo-feudalism". It dared to question traditional attitudes towards economics, and for that it was hated and shunned by wealthy conservatives.

 

Inequality has been justified on many grounds, "principally noted for the absence of the most important reason, which is the simple unwillingness to give up what [the rich] have." Equality has been argued to lead to uniformity and monotony (the rich sponsor the arts and education), redistribution has a musty association with godless communism, and the original Ricardian defense was that the present system was ultimately inevitable, and any attempt to change it would only lead to short-run inefficiency which would make everybody worse off.

 

This attitude, that some amount of suffering is necessary in the current system, and that any major changes in it would be self-defeating, is what I call Sacrificing to the Volcano God. We have turned economics into a religion, where the mistakes are common, yet the fundamental assumptions it is based on is beyond question. Gaping flaws in logic are ignored, or even held up as unanswerable mysteries that laymen could never understand. When the Volcano God rains ash and lava upon us, it is because we angered the Volcano God with our sins of minimum wage laws, child labor laws, environmental regulations, and worker safety laws. More sacrifices are needed or the Volcano God will destroy us all.

 

The High Priests of Economics never explain exactly how these sacrifices will fix the economy, nor do they mention that the sins in question might be their own. Yet we still rush to offer up our children's futures through unpayable debts while never considering that there might be better alternatives.

 

"Jesus Christ is Free Trade, and Free Trade is Jesus Christ."

- Dr. Robert Browning

 

Like the Volcano God, nothing can stop globalization. There is no alternative.

Besides, globalization is good. They tell us that it creates jobs, and you are expected to believe them even while you watch all the factories in your town close down and get sent overseas.

 

"Outsourcing is just a new way of doing international trade."

- N. Gregory Mankiw, chairman of Bush's Council of Economic Advisors

 

This shouldn't surprise anyone. David Ricardo, legendary economist and free-trade proponent, explained how this dynamic worked nearly two centuries ago.

 

"If instead of growing our own corn... we discover a new market from which we can supply ourselves... at a cheaper price, wages will fall and profits rise. The fall in the price of agricultural produce reduces the wages, not only of the laborer employed in cultivating the soil, but also of all those employed in commerce or manufacture."

- David Ricardo, Des principes de l'economie politique et de l'impot, 1835

 

So you see, your wages are supposed to fall with free trade globalization. Those who worship the Volcano God knew this all along. They also knew that our manufacturing base was going to move south of the border when NAFTA was passed. They fail to differentiate between free trade and global labor arbitrage.

 

[...]

 

Neofeudalism is a concept in which government policies are designed to systematically increase the wealth gap between rich and poor while increasing the power of the rich over the poor. It's a party-neutral idea. There is no cabal pushing the plan, merely the sum effect of pressure from the wealthy elite.

 

Those policies can be seen today. Just look at the fact that earned income are taxed at a higher rate than unearned income, and the repeal of the inheritance tax.

 

Other ways are harder to measure but no less real, such as white collar criminals receiving slaps on the wrist, while the poor feel the full weight of the law. It's a system with two sets of rules, one for the rich another one for the poor, and that is the definition of neofeudalism.

 

Another manifestation of neofeudalism is the growing power of corporations, that leave the poor dependent on private interests more powerful than the government, a situation resembling traditional feudal society.

 

Currently the top 1% of society own 40% of the nation's wealth. The lower 50% of the nation have the mean assets worth less than $28,000. The richest 10% are worth, on average, 143 times that, or $3.976 million.

 

Despite this disparity, 80% of tea party members think that raising taxes on households making more than $250,000 to pay for universal health insurance is a bad idea. At the same time, 88% of tea party members think Obama, a president they despise, "favors the poor", and 73% think that "providing benefits to the poor encourages them to remain poor".

 

Noam Chomsky in Hegemony or Survival had this to say:

 

If working people depend on the stock market for their pensions, health care, and other means of survival, they have a stake in undermining their own interests: opposing wage increases, health and safety regulations, and other measures that might cut into profits that flow to the benefactors on whom they must rely, in a manner reminiscent of feudalism.

 

Neofeudalism isn't just about the powerful taking over everything. It's about conditioning the poor to accept their designated role in society, even fighting to defend the ability of the wealthy to exploit them. It requires working people to do things that are against their own interests, and nowhere is this more true than in our current economic system.

 

How is it that we have a politico-economic system in which the government's explicitly stated goal is to entice people to take out loans for houses and cars they don't even need? 150 million cars on the road and we must keep buying new ones? Millions of vacant housing units and we need to build new ones? Homes so full of Chinese junk that half of it goes into off-site storage, and we need to shop more? For whose benefit? Ever heard of debt-slavery? How about feudalism?

 

Here's an even better word: peonage. It always amazed and confused me how everyone in America is obsessed with their credit rating. It's almost as if people don't realize that credit equals debt. Debt is something that people have feared for thousands of years, because unlike Americans today, historically debt was always associated with another scary term - slavery. Debt bondage, indentured servitude, slavery, they all mean the same thing. Yet somehow the establishment has convinced us that the ability to "manage" our slavery is something to be proud of. They even have a rating system for it.

 

I'm not being facetious. Being heavily in debt means you don't have the freedom to quit your job. People who have lost their job are unable to move because the enormous debt tied to homes they can no longer afford.

 

Being tied to a piece of land is the definition of serfdom.

 

Every once in a while our love for the wealthy elite who are exploiting us wanes. When that happens the American people need to be distracted. Perhaps it is incompetent terrorists in caves in faraway lands. Or maybe its poor immigrants who want low-paying jobs. One way or another there will always be a scapegoat, and we will need to declare war on them. As Taibbi put it:

 

It's a classic peasant mentality: going into fits of groveling and bowing whenever the master's carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you're a peasant when you worship the very people who are right now, this minute, conning you and taking your shit. Whatever the master does, you're on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger.

 

http://www.huffingtonpost.com/garrett-johnson/slouching-towards-neofeud_b_568972.html

 

Clearly the answer is to outlaw all lending immediately.

[olyclimber]

we need to stop being tolerant with these intolerant people.

[j_b]

Homes so full of Chinese junk that half of it goes into off-site storage, and we need to shop more?

 

When these storage places started appearing all over the place I thought it was the dumbest idea, until I met a bunch of people who had houses full of stuff and loads more in storage places, most of it not really valuable. I don't know whether people do it just because owning lots of stuff is a symbol of wealth but it seems so useless that it is grotesque.

[j_b]

Clearly the answer is to outlaw all lending immediately.

 

why would you do that?

 

Is it really all you have to say about a brilliant rant.