Saturday, May 3, 2014

How Capital Really Came to Control the Human Populace in the 21st Century- Part II

The evolution of central banking and currencies to the system of globalized Neoliberal capital is predicated on what came before in terms of eliminating multiple local currencies to induce scarcity (See Pt. I). The worth and fluctuation of the selected central currency could then be determined by assorted manipulations, e.g. such as in the present Federal Reserve era in the U.S. with the Fed’s quantitative easing program that has ‘juiced’ the stock market to unheard of highs – while depriving savers of income. In this way the Fed deliberately super-charged the financial landscape in favor of speculation over safe saving.

 Conversely, the Fed has been able to create scarcity when it wants to – say by implementation of deflationary policies. Much of the Fed’s basis and purpose has been discussed at length by James Livingstone in his monograph 'Origins of the Federal Reserve System- Money, Class and Corporate Capitalism’, 1890-1913. As he observes on, p. 233:

"...the creation of the Federal Reserve is an episode in, or evidence for, the emergence of a modern ruling class.. "

How so? Because all money created - on average $30-40 billion a year- is *brokered* into the system. That is, made available by escalating debt. This is achieved by the Fed using the money created to purchase government bonds, thereby making this (debt-burdened) product available to private banks at greater cost, so they must charge much higher interest than the bonds to secure what they regard as a 'reasonable return'.   This is also why JFK's injection of "U.S. Notes" (created by the Treasury not the Federal Reserve) couldn't be tolerated, because it introduced a non-debt burdened currency that would gradually move the financial edifice away from scarcity and hoarding  - for more on this, see:

And so while nascent Americans, in their revolutionary fervor, had thrown off the shackles of one monarchy, within 137 years they came under the boots of another. This one devoted to the business and banking classes, who demanded ever more favored treatment vis-a-vis 'ordinary' citizens.

 As Rushkoff points out (op. cit., p. 171):

To this day, the bias of centralized currency is toward scarcity and hoarding. This slows down the rate at which money circulates, while concentrating wealth at the top.”

This is not difficult to figure out. If only a certain species of coinage or currency is accepted as ‘real’ then there will be a natural tendency to hoard it. If it is hoarded then there will be scarcity, so aggregate demand will seize up and de facto fiat money will have to be printed to compensate. In the case of the past six years or so this fiat money has been engendered by the Fed holding down interest rates to absurd levels while doing monthly bond buying to the tune of $85 billion. The hoarding is now all in terms of Wall Street and Banks (as well as billionaires) who are able to exploit the cheap money environment in assorted nefarious ways. These include: inside information, flash trading, hedge fund gaming, credit default swaps and enticing ordinary investors to unwisely buy into the raging market – then collecting the spoils when it collapses – as all Bull markets do.

The game, obviously, is rigged so that the rich can get richer and everyone else gets poorer.  In other words, contrary to Neolib propaganda it is zero sum: each extra dollar the wealthy rats get is one less for you. Worse, the Neoliberal imperative dictates that those on the lower rungs be disallowed any economic security, especially via government social insurance programs. In this way it feeds economic inequality while it rewards the speculator and banker class - namely those who benefit from the rigged Neolib capitalist system. It also helps to corrupt the political class via unregulated campaign contributions – which, instead of being equitably distributed to all contenders – is now hoarded by only a few top candidates. When the majority of candidates lose – as they must -  all the donations contributed are lost.

Five years after the New World Order dawned,  Jay Bookman aptly noted('The New World Disorder Evident Here, Abroad', in The Baltimore Sun, December 15, 1997):

"The global economy has been constructed on the premise that government guarantees of security and protection must be avoided at all costs, because they discourage personal initiative. In times of crisis, however, that premise cannot be sustained politically. In times of trouble it is human nature to seek security and protection and to be drawn toward those who promise to provide it. That is how men such as Adolf Hitler, and Vladimir Ilyich Lenin came to power, with disastrous consequences."

This aspect also has to do with what economists call “Pareto optimality” – which is another reason the rich keep getting richer and well known even before Piketty’s book arrived. This is based on the Pareto distribution, which confers much greater value (in what are called ‘utils’) to the money of the rich, than the money of the non-rich.  See e,g,

Since this difference exists, Vilfredo Pareto argued more power must be given to those higher util dollars. Today this would mean dispensing with government subsidies like food stamps, unemployment insurance or welfare. It also would also mean cuts to Social Security since by Pareto Optimality it wasn’t right for old codgers to simply collect money for breathing every day – as opposed to investing or working for it.

One hidden, ugly side of the Neoliberal imperative is that when nations come under its yolk – as at least one part (western) of the Ukraine is likely to do – then all its government  economic and social supports must also be cut. The people are then tossed into the ΓΌber market just like all others haplessly trapped in the Neolib matrix. This means the same thing that happened to the Russians in the 1990s must befall them: all pensions cut, no more government food or energy subsidies, and wage cuts of 40 to 50 percent (as recently happened with Greece). Oh, and rents increased by 50-70 percent too!

An even more ugly side, as noted by Rushkoff  (Ch. 7, ‘From Ecology to Economy’) is that all remaining wealth on the planet must be hoarded and rendered scarce. This means millions of hectares of forest must be removed each year to make palm oil for assorted commercial products, even as millions of acre-feet of water must be wasted and despoiled each year to reap fracking profits. Whether ordinary people have any trees, or clean water left is not an issue that concerns the Neoliberal, only ensuring that they are faced with water scarcity, as well as that of other resources (clean air).

If you need some insight into what the Neoliberal global order will look like in the year 2050, check out the first five minutes of the scifi film ‘Elysium’.  Look carefully at the landscape of wasted, rotted out buildings, scruffy people in rags eking out an existence and then look around now – and see the emergence of a similar landscape if the global frackers get their way.

Again, Pareto optimality and its perverted economics dictate this: to amass and hoard ever more wealth (in money) so that natural wealth must be destroyed. If ordinary people die by the millions because of the effects of climate change or polluted water, e.g. from cholera or amoebic dysentery, it matters not because those people control less wealth anyway – so in terms of Pareto optimality – aren’t worth that much. This is also why the Neoliberal sees more sense in dispensing massive tons of toxic garbage to the less developed world: the inhabitants of those locales already are facing serious health issues so more toxic waste doesn’t matter in the scheme of things. For the time  being it’s more economically useful than letting it pile up here in the U.S., where it might generate ten times more cancers, and having millions consume Medicare funds to get them treated.

Of course, once the Neolibs can get rid of all “entitlements” that all might be changed.  These so-called entitlements are the main bulwark now standing between a barely surviving Middle Class in the U.S. (which has already been overtaken by Canada's Middle Class, not surprisingly) and one that goes under. In that future all seniors will only receive a "welfare" pittance, and will have to work in some manner if they want to live at a decent level.

 The bottom line is that the Neoliberal imperative as I’ve described it is what’s responsible for generating massive income inequality. While Thomas Piketty’s factors (i.e. inherited wealth)  do enter, they are not as historically cogent as the ones Douglas Rushkoff points out that preceded them – especially the original move to centralized currencies and banking.

See also:


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