On 3/23/09, nwaakwukwo wrote:

Fed to Pump Another $1 Trillion Into Economy

The Federal Reserve announced Wednesday that it will devote another $1.2 trillion to unfreeze credit
markets and help stimulate the sluggish economy. Greg Ip of The Economist provides details
on the move.

The use of terms like "weighed in the balances and found wanting", "legion", "avarice", "moral pressure", and the blaming Democrats for what African American and Hispanics allegedly do, is playing to a shrunken audience of religious conservatives and bigots. It is a failed tactic.The years of the "moral majority" and the religious right Christian Coalition of Buchanan, Robertson and Bennett which have been exposed as sham and now impotent.

The failure of the global economy has nothing to do with religion, race or the rhetoric of morality and blame that Buchanan uses in media manipulation of American . The failure of the global economy is the failure of capitalism. The problem is economics and the solution is economics.

Buchanan is not an economist, a financial advisor, a business analysist or economic researcher. Yet, because he is a media person, his analysis must be challenged.



Pat Buchanan writes below that "Banks were morally pressured by politicians into making home loans to folks who could not remotely qualify under standards set by decades of experience with mortgage defaults."? So Buchanan is sayin' that politicians "pressured" banks to make risky loans? It was the other way around though. Banks pressured politicians, gave them campaign contributions, so that the politicians would pass deregulatory banking legislation:

"The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999, is an Act of the 106th United States Congress which repealed part of the Glass-Steagall Act of 1933, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services." http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

It had nothing to do with the Democratic and Republican politicians concerned about African-Americans and Hispanic-Americans not owning houses and enabling them to do so.

Speculative finance capital, seeking to make profit out of pure money transactions, caused the financial crisis, not defaults on subprime mortgages. The subprime mortgage was just another mechanism created by banks to create a ponzi pyramid scheme that would ultimately collapse like all other such speculative bubbles and they knew it.

Buchanan goes on to write that: "There are the politicians who bullied banks into making loans the banks knew were bad to begin with and would never have made without threats or the promise of political favors." But the banks or mortgage companies did not keep these mortgage loans on their books. They sold the loan, made a fee and were done with it. And if the ratings agency hadn't been on the take and lookin' the other way rating these bundled mortgages as AAA+, instead of reflecting their real risk, the writing of these loans to workers who otherwise could not qualify for a home mortgage would have come to a screeching halt.

Buchanan's argument as to the blame for the subprime swindle, "African-Americans" and "Hispanics" is just another red herring.

Thanks Joe once again for your real-deal analysis.



March, 2009

Critique of Pat Buchanan

by Lil Joe

Pat Buchanan in his Commentary below is engaging in his usual, racist demagogy, concerning the economy and politicians in America, to "explain" the present economic crisis. The article is titled "systemic failure". One would expect an objective analysis of capitalist commodity production and appropriation, that is, the breakdown in the circulation of commodities by money: the failure of that system.

Instead, although Buchanan begins stating the obvious economic facts it is laced in mysticism and ideological demagogic individualism and guilt/blame. He wrote:

"As the U.S. financial crisis broadens and deepens, wiping out the wealth and savings of tens of millions, destroying hopes and dreams, it is hard not to see in all of this history's verdict upon this generation. We have been weighed in the balance and found wanting. For how did this befall us, save through decisions that brushed aside lessons that history and experience had taught our fathers?"

The obvious economic fact is that there is a financial crisis in the United States that, as it broadens and deepens, is wiping out monetary "wealth and savings of tens of millions". What does that mean? We must begin with objective, i.e., universal definitions:

"Generally speaking, "wealth" is the value of everything a person or family owns, minus any debts. However, for purposes of studying the wealth distribution, economists define wealth in terms of marketable assets, such as real estate, stocks, and bonds, leaving aside consumer durables like cars and household items because they are not as readily converted into cash and are more valuable to their owners for use purposes than they are for resale (Wolff, 2004, p. 4, for a full discussion of these issues). Once the value of all marketable assets is determined, then all debts, such as home mortgages and credit card debts, are subtracted, which yields a person's net worth. In addition, economists use the concept of financial wealth, which is defined as net worth minus net equity in owner-occupied housing. As Wolff (2004, p. 5) explains, "Financial wealth is a more 'liquid' concept than marketable wealth, since one's home is difficult to convert into cash in the short term. It thus reflects the resources that may be immediately available for consumption or various forms of investments."

"We also need to distinguish wealth from income. Income is what people earn from wages, dividends, interest, and any rents or royalties that are paid to them on properties they own. In theory, those who own a great deal of wealth may or may not have high incomes, depending on the returns they receive from their wealth, but in reality those at the very top of the wealth distribution usually have the most income.(G. William Domhoff, 2006 http://sociology.ucsc.edu/whorulesamerica/power/wealth.html)

Income that is derived from the production of new wealth is appropriated corresponding to relations of production and to subsistence, which determine class relations. In modern capitalist systems production and distribution are between capitalists, proletarians and landlords, primarily. So-called "small businesses" in America are not an economic but a legal category: businesses with less that 500 employees. (See http://www.smallbusiness.com/wiki/Small_business_FAQ)

Productive Capitalists - which includes industrial capital and landed capital - are the classes that own the means of social production and employ wage labor, whose members income is therefore profits derived from the exploitation of the proletariat, whether in industry or agriculture, where wealth is produced. What most people regard as "small businesses" - mom and pop grocery stores, liquor stores, hardware stores, hamburger stand and so on are really but petty-bourgeois, self-employed - outlets for industrial and agricultural commodities. The economy doesn't need them. They are in fact being displaced by national and international outfits, large merchant capital, such as McDonald's, Food For Less, Wal-Mart and Best Buy.

In productive capital, which includes industrial capital and landed capital, the products of labor are not owned by the workers who produced them by work in the labor process, but by the capitalists, which by purchasing labor power appropriates from the producers the right of ownership of the products of their labor.

The conditions of the "contract" is that the workers are hired at a price of labor power per hour that equals the money needed for those workers to purchase means of subsistence, the definition of wages, the value of labor power that is transferred to the products by his or her work, whereas the capitalists by prolongnation of the working day and speed-up compels the workers to work surplus labor time that is objectified in the product as surplus value, and this is from whence profits are derived and measured, the rate of surplus value and degree of exploitation of wage labor by capital is quantified.

By proletariat, is meant the class of modern wage workers, which having no means of production of their own are compelled to sell their labor power in order to live - to procure means of subsistence by purchase. The house a worker owns, or more than likely is in the process of paying for, is therefore not wealth, as it doesn't constitute a means of producing wealth. Rather, it is a means of subsistence, and rather than "appreciate" in its exchange value over time, it depreciates through its usage.

While landed capital is wealth - that is wealth as agribusiness - owned by capitalists or lands rented from landowners by capitalists, landed capital also include ownership of natural resources from which wealth is derived by wage labor - e.g. mines, logging, &c., thus, their profits are also derived from the exploitation of wage labor. On the other hand, landlords income is derived from ownership of land or dwellings, which are rented to capitalists (ground rent) e.g. agribusinesses, production sites, office buildings or to workers - houses, apartments.

"The owners merely of labour-power, owners of capital, and land-owners, whose respective sources of income are wages, profit and ground-rent, in other words, wage-labourers, capitalists and land-owners, constitute then three big classes of modern society based upon the capitalist mode of production." (Marx: Capital Volume 3 @: http://www.marxists.org/archive/marx/works/1894-c3/ch52.htm )

Now, as to what's called "finance capital", it is not itself directly involved in the production of wealth. They attract money or currency from all classes of society by offering interests to depositors, to "save", or they sell insurance policies, or some other monetary gimmick to appropriate tons of cash. These monetary institutions turn around to rent money to capitalists, petty bourgeois and to workers, financing production, pay rolls, home purchases, automobile purchases, extend credit and credit cards, &c., at even higher interest rates than they give to those capitalists, petty-bourgeois and working class depositors in the first place. Finance capital is unproductive, but solely consumptive - in financing production and consumption by money taken from producers and consumers finance capital is a parasitic class of capitalist leaches.

However, it is a red herring to assign the lion's share of monetary blood sucked from the economy that is derived by finance capital parasites to what it takes from home mortgaging. It makes far more money from interests derived from industrial and landed capital production, where it appropriates as interests a share of real wealth from the labor process.

Where there is yet again another periodic crisis of profits, declining rates of profits in productive capital, due to new technology displacing human laborers on one hand, and relative overproduction (an excess of commodities relative to market demand, thus unsaleable products) on the other, as is now occurring, e.g. the auto industry and its suppliers, there are lay-offs as well. These factors result in banks and financiers receiving less demand for money from industrial capitalists and fewer deposits from workers on one hand, and bankruptcies and defaults on mortgages &c. on the other.

These systemic factors, contradictions in the basic structures of capitalist commodity production by wage labor, rather than mere mortgage defaults are the systemic causes of the financial crisis. Capitalists in the house construction business may be hit by the housing crisis, but this crisis of a glut of houses occurs because workers don't have proper income to pay mortgages to purchase these houses.

The declines in the stock markets, wiping out trillions of dollars of wealth, is not because of mortgage defaults, however, but because industrial capital has declining rates of profits, due in part to overproduced commodities, relative to demand, resulting in unsaleable commodities and thus the inability to realize the values embodied in those commodities, these unsold commodities hurt profits. It is declining rates of profits resulting from the displacement of men and women by machines and robots on the one hand, and overproduction in the economy as a whole, that are causing industrial and merchant capitals stock values to drop, independently of the mortgage crisis and of the finance capital crisis.

Finance capital not only appropriates wealth in the form of interests from capitalists and workers, in the so-called "private sector". It also appropriates wealth from the government debt, where such wealth is taken from wages and profits: both are taxed by the State. The parasitic finance capitals leach on to the State.

"The system of public credit, i.e., of national debts, whose origin we discover in Genoa and Venice as early as the middle ages, took possession of Europe generally during the manufacturing period. The colonial system with its maritime trade and commercial wars served as a forcing-house for it. Thus it first took root in Holland. National debts, i.e., the alienation of the state - whether despotic, constitutional or republican - marked with its stamp the capitalistic era. The only part of the so-called national wealth that actually enters into the collective possessions of modern peoples is their national debt. Hence, as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply it is in debt. Public credit becomes the credo of capital. And with the rise of national debt-making, want of faith in the national debt takes the place of the blasphemy against the Holy Ghost, which may not be forgiven.

"The public debt becomes one of the most powerful levers of primitive accumulation. As with the stroke of an enchanter’s wand, it endows barren money with the power of breeding and thus turns it into capital, without the necessity of its exposing itself to the troubles and risks inseparable from its employment in industry or even in usury. The state-creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But further, apart from the class of lazy annuitants thus created, and from the improvised wealth of the financiers, middlemen between the government and the nation-as also apart from the tax-farmers, merchants, private manufacturers, to whom a good part of every national loan renders the service of a capital fallen from heaven - the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to agiotage, in a word to stock-exchange gambling and the modern bankocracy. (Marx: Capital Volume 1 @: http://www.marxists.org/archive/marx/works/1867-c1/ch31.htm )

In the United States, during World War II and the post war boom, the government borrowed from finance capital and repaid loans and interests with currency, backed by gold. All gold-money used in circulation was seized by the government in 1933, which was exchanged for dollars at the fixed rate of $20.67 an ounce.

The value of gold as universal equivalent is determined through the labor process that absorbs labor's value, that is, its objectification embodies a portion of socially necessary labor time in context of all values produced - that is a portion of the Gross National Product. With the United States policy of currency denominations displacing bullion as official legal tender, it took the instability from the market, resulting from supply and demand of gold, and placed the gold at Fort Knox. This gold therefore became a fixed standard of value, denominations of currency are pegged to specific quantities of gold, although it was no longer redeemable or exchangeable for gold on demand by the holder of Federal Reserve Notes. The printing of money is inflationary relative to gold, the standard of value and universal equivalent, as it is congealed socially necessary labor time equivalent to all other products which are also values qua congealed socially necessary labor time spent in production, the GNP.

Having collapsed from internal contradictions of production of commodities by exploiting wage labor, declining rates of profits and overproduction, the American auto industries fell into the Great Depression, along with other industrial capitalists producing consumer goods that couldn't be sold. The New Deal government spending, but in particular government spending on means of destruction and killing in World War II, were the factors that revived production.

General Motors, Ford and Chrysler were manufacturing tanks and armored vehicles, Lockheed, Boeing, McDonald-Douglas were making jets, B52's, ICBMs, and of course Ingalls Shipbuilding, a division of Litton Industries supplied and serviced naval warships and vessels. Finance capital was financing both capitalist's production and mortgages for workers homes, but also the government's deficit spending for the procurement of these produced means of destruction and killing.

At the time the American economy was the biggest and most stable in the world, and this was reflected in the strength and stability of its currency, thus the stability of American finance capital, together with the booming housing market and construction in the creations of suburbs and highways. But, this wouldn't last. Economies of scale are finite, and the new economies of rebuilt Europe and Asia Pacific became strong competitors.

Since the Great depression, New deal and World War II, Keynesian economics of government deficit spending has been a chief component of the American version of capitalist commodity production and appropriation. The Republicans are right, it wasn't the New deal government make work and hand-outs to the mass of the unemployed that "stimulated" the capitalist Recovery. But, what they fail to acknowledge is that the revival of their sacred "private sector", restoring production and jobs, was nonetheless government spending: the bankers financing of and government's purchasing from the war industry!

Six months into World War II, Time magazine reported: “The automotive industry has undertaken to build 75% of all the aircraft engines, more than 33% of the machine guns, 40% of the tanks, besides all the motorized units. One company alone is making more than half the Diesel engines for the whole U.S. Navy.”

And Time added: “It is cutting costs and saving time all along the line through mass-production short cuts: a parts plant lopped 25% off the time Army Ordnance thought it would take to make machine guns; an automaker cut the time scheduled for a British ack-ack gun by four months and evolved a new way of broaching the barrel that cut that operation from 3½ hours to 15 minutes.

“But perhaps the most extraordinary thing of all about Detroit-at-war is the change in the industry's thinking about improvisation. As late as a year ago, many automen swore that not much more than 15% of their wonderful one-purpose tools could be used for anything but automobile production.

“This week's report cited one automaker who is now using more than 80% of his automotive tools and equipment for war production. For the industry as a whole, the big manufacturers have converted some 65% of their automotive equipment, the smaller ones more than 40%.”

The sectors of finance capital put out the most money for the financing both to industrial and landed capital for the production of means of destruction and killing, both the extractions of raw materials and the retooling of means of production from production of means of consumption to means of destruction and killing, not just in the auto industries but in aircraft from passengers and economic performance planes to fighter and bomber planes, but they also, as the primary purchaser and largest single holder of government bonds, were the chief source which financed the government's purchase of those means of destruction and killing. The government "stimulated" the industrial economy by purchasing means of destruction and killing, on the one hand by deficit spending, and on the other it "stabilized" the banking crisis (expressed, in the 1929 run on banks) not just by regulations, and guarantees to depositors, but by the offering of a mass of bonds, the majority of which were bought by banks to purchase those same means of destruction and killing.

World War II also had the side benefits of, from the Malthusian point of view, killing off the "surplus population" - twenty million soldiers, otherwise unemployed workers, were killed by this war, and even more civilians, more European than American soldiers. This, together with the European capitalist's government representatives directing each nation's army, air force and navy's armed forces to destroy the rival capitalist's productive forces by tanks and bombs, devastated Europe economically. This provided American capitalists an opportunity, after the War, to invest in the rebuilding of Western Europe, Japan and South Korea: thus, the so-called "post-war boom".

It was the context's of World War II, the Korean War, and the Marshal Plan that changed the American South from rural agricultural share-cropping production and appropriation - the need for industrial commodities for the war effort and to rebuild devastated Europe - that provided jobs and incomes for the Dust Bowlers (See John Steinbeck's "The Grapes of Wrath") in California from Oklahoma, &c. This also engendered and enabled mass migrations of Black share croppers into the proletariat of the cities, North as well as South, which resulted in union organization and expansion, and the Civil Rights Movements of the 1950s-60s, and revolutionary movements in the late 60s-early 70s, along with the anti-war movement.

This enabled banks and construction companies during this period of the post-war boom - which enabled unions to grow and white worker's in them to flourish, and also to exploit America's cultural racism - to exploit both the new money of those workers and the racial prejudices of those white workers, to build suburbs, leaving inner city slums to Black and Latino migrants. This was the beginning of the so-called housing bubble.

It was the successes of the civil rights movement that enabled Blacks and other minorities to enter union jobs, make money and also leave the inner city slums. Fair housing legislation ended de facto segregation and gave blacks and others legal recourse to move into those suburbs, living in integrated neighborhoods as well as sending their children to integrating public and private schools.

This is why Richard Nixon's "Southern Strategy", David Duke, Ronald Reagan and Patrick Buchanan reacted to this racial integration - i.e. the break-down of racial discrimination barriers - in such a reactionary manner. This was their demagogic political appeal to the white racism, which was at the time still prevalent among the white working classes.

"Philadelphia, county seat of Mississippi's Neshoba County, is famous for a couple of things. That is where three civil rights workers -- Michael Schwerner, James Chaney and Andrew Goodman -- were murdered in 1964. And that is where, in 1980, Republican presidential candidate Ronald Reagan chose to launch his election campaign, with a ringing endorsement of "states' rights." It was bitter symbolism for black Americans (though surely not just for black Americans). Countless observers have noted that Reagan took the Republican Party from virtual irrelevance to the ascendancy it now enjoys. The essence of that transformation, we shouldn't forget, is the party's successful wooing of the race-exploiting Southern Democrats formerly known as Dixiecrats. And Reagan's Philadelphia appearance was an important bouquet in that courtship.
(William Raspburry: Reagan's Race Legacy, 2004 @:http://www.washingtonpost.com/wp-dyn/articles/A39345-2004Jun13.html)

Patrick J. Buchanan was part of this racist legacy, one of its authors as a senior Reagan adviser in fact. It is therefore not surprising, that the centerpiece of Buchanan's analysis of the "failure of the system", not only ignores and fails to do a critique of the capitalist system of appropriation, i.e. of the break-down of the mode or system of circulation of products by money, but that he instead appeals to the remnant of racists of his generation.

Patrick Buchanan wrote:

"As the U.S. financial crisis broadens and deepens, wiping out the wealth and savings of tens of millions, destroying hopes and dreams, it is hard not to see in all of this history's verdict upon this generation. We have been weighed in the balance and found wanting. For how did this befall us, save through decisions that brushed aside lessons that history and experience had taught our fathers? It all began with the corruption called sub-prime mortgages. The motivation was not wicked. Democrats wanted to raise home ownership among African-Americans from 50 percent to the 75 percent of white folks. Rove Republicans wanted to do the same for Hispanics."

So, setting aside the rhetoric of red herrings about "hopes and dreams", pseudo eschatological rhetoric about "history's verdict on 'this generation" and racist tinged appeals to the gallery about "lessons of history and experience taught our fathers" about how to deal with "African-Americans" and "Hispanics", since this article by him is supposed to be on the present economic crisis, how does Buchanan explain the previous bank crisis of the 1980s, the Savings and Loans crisis in the Reagan era, as Blacks and Hispanics were still in the old houses and apartments in the ghettoes and barrios?

The savings and loan crisis of the 1980s and 1990s (commonly referred to as the S&L crisis) was the failure of 747 savings and loan associations (S&Ls) in the United States. The ultimate cost of the crisis is estimated to have totaled around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government—that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts —which contributed to the large budget deficits of the early 1990s.

The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990–1991 economic recession. Between 1986 and 1991, the number of new homes constructed per year dropped from 1.8 million to 1 million, the lowest rate since World War II.

This was due to deregulation and interest rates between small banks and the giant banks, in context of a recession and inflation.

This current industrial capitalist crisis, is cumulative of decades of economic shifts in production and finance, immediately engendered by declining rates of profits and overproduction, reflected back into big finance capital, and would have happened with or without deregulations.

The currenct economic crisis is historical in that it is cumulative and systemic. It is not, as Buchanan asserts, "history's verdict on this generation", as some kind of divine punishment for liberal Democrats having "brushed aside lessons that history and experience had taught our fathers" (whose fathers?). This is metaphysical mumbo jumbo, no different than Jerry Falwell and Reagan associating AIDS with god's punishment of homosexuals and Pat Robertson calling Hurricane Katrina god's wrathful punishment of the sinners of New Orleans.

Although Buchanan begins with the statement of objective economic facts, that is that as the "financial crisis broadens and deepens, wiping out the wealth and savings of millions", not only does he not define 'wealth' or 'savings', but he lumps together 'tens of millions' of so-called Americans, without regard to relations of production determined class modes of income viz: capitalist profits, finance interests, landlord's rent or proletarian wages.

To have presented a class analysis would have shown that the current, sweeping and deepening crisis is at, and shaking its way up from the very fundamentals of the contradictions of capitalist commodity production, wherein profits are derived by capitalists from the exploitation of the proletariat on the one hand, and the financial crisis resulting from the dependency of finance capital on industrial, landed, merchants capital and government bonds on the other.

Instead, Buchanan on a pseudo economic but actual racial sociological, political demagogic rave rather diverts to talks about white suburbs and denounces Democrats for supposedly enabling "African-Americans", and the Republicans enabling "Hispanics" to buy homes in these once exclusively "white" residential communities! I say this: the overwhelming majority of "African-Americans" and "Hispanics", compared to whites of the working poor, already owned homes, but those homes were/are in the bayous and inner-city slums, which depreciate without any illusory appreciation.

If Buchanan was really making an economic analysis of the crisis as being derived from objective economic data, rather than political fascist demagogy, it would be based on economic rather than racial categories. Objective, universal economic categories in this connection are creditors and debtors, not "African-Americans" vis-a-vis "white folk" or "Hispanics". In other words, if Buchanan was presenting an economic analysis of the failure of the system, even if he stupidly restricted it to finance capital, which he in fact does, he would have premised his analysis - assuming his statistics are accurate - predicated upon the data that "50 percent" of those suckered into "sub-prime mortgages" couldn't afford them. In fact, the majority of those who got the loans and who are loosing their homes are neither "African-Americans", nor "Hispanics", but the working poor, mainly so-called "white folk", whose wages are stagnant, and interest rates rose against them and overtook them.

But, back to real economics of wealth creation and distribution. Currency or bank notes - e.g. Federal Reserve Notes - do not create wealth. Rather, it is legal tender that express the value of labor objectified in gold, derived from Nature through labor processes of panning, more by mining operations all over the world. Thus, gold is wealth, currency is not.

After the government required all gold used in monetary transaction be exchanged for dollars and coins of silver, nickle and copper, the government hoarded the gold in Fort Knox. Thence forth all market transactions, including banking transactions, were done in currency, but on the basis of gold standard decreed by the quantities hoarded by the government.

During the Great Depression, World War II and the Post-War Boom the American proletariat was producing use-values as exchange values - capitalist commodity production by wage labor - on the gold standard. But, as the government became more involved, the production of means of destruction and killing were commodities purchased by the government, but its nuclear bombs and ICBMs could not be sold to other customers, and could not be consumed as either through productive consumption in making new commodities, nor by consumption in the reproduction of human beings as means of subsistence.

The power of American finance capital had been based in economies of scale in the US by the conversion of its economy from production of means of production of means of subsistence, which had collapsed into the Great depression, acerbated by the Dust Bowl famine, to the production of means of destruction and killing, together with its supplying its British and French allies on one hand, and destroying Germany and Japan on the other, and consequently the production of export capital to and the investment in production of infrastructure and means of production investments in Western Europe and Japan.

As a result, gold and money, scientists and engineers, were drawn to American as the then untouched centres of production and investment. The gold and silver form in Europe became the standards of value as European currencies became worthless as the result of inflation prior to the war, and instability owing to the destruction of industries, agriculture, cities and millions of lives during the war. The mainland U.S. was untouched by the destruction, but on the contrary benefited form it as European imperialists destroyed each other, European capitalists invested in American industries and finance capitals. The monetary wealth of Europe, but in particular of British capital migrated to America.

In a recent article in The Gaurdian (UK), in response to the current crisis and shift of economic balance of power from America, "Shaping the world: Bretton Woods 1944", Larry Elliott wrote:

"It was just 10 days after the D-Day landings in Normandy that John Maynard Keynes set sail across the Atlantic for the conference that was to shape the economic order of the postwar world. It took seven days on the Queen Mary for the British delegation to reach New York rather than the seven hours it took Gordon Brown yesterday. But the goal was similar: to reconstruct an international financial system battered by crisis.

This weekend diplomats from 20 industrialised and developing nations will get together in Washington for what has been dubbed Bretton Woods II - the name taken from the meeting in New Hampshire 64 years ago that created the World Bank, the IMF, and the system of fixed exchange rates that underpinned the rapid expansion after the second world war.

The original Bretton Woods was a more leisurely affair than the conference this weekend.
Keynes and his counterpart at the US treasury had been beavering away on blueprints that would help reconstruct postwar Europe and avoid the policy mistakes that led to the 1930s Depression. Delegates from 44 nations attended the opening of the conference on July 1 1944, and pre-communist China and pre-independence India were represented. The US, as top industrial power, was the host, and Keynes, for all his eloquence, fought an uphill battle to stop it riding roughshod over everyone else.

In 1944 the route for avoiding the mass unemployment the 1930s had seen was a form of the gold standard. Currencies were pegged against the dollar, and could fluctuate by 1% either side of a set parity. The US currency could be exchanged for gold.

Britain and the US had differing ideas on how to correct trade imbalances. Either the creditor nation (then the US) could adjust by increasing imports from the debtor nation, or the debtor nation could shrink its economy to balance its current account. Keynes, representing a country virtually broke by then, argued for the former; Harry Dexter White insisted debtor nations take the strain. The US, with 50% of global GDP, won.

The Bretton Woods system survived for about 30 years but started to crack in the late 1960s, with the cost of the Vietnam war and US welfare reforms. The US started to export higher inflation to the rest of the world. Faced with drained gold reserves, Richard Nixon, in 1971, suspended Bretton.
( http://www.guardian.co.uk/politics/2008/nov/14/bretton-woods-1944-keynes-imf )

The so-called Cold War and Space Race as its context - the pretext for mass production of Inter-Continental Ballistic Missiles being to "send a man to the moon and bring him back", covered for the continuation of government spending on arms, following the conclusion of World War II. With the permanent arms economy, finance capital was lending to industrial and landed capital, and to the government to purchase from them, means of destruction and killing that could not be circulated.

In other word's, in the civilian economy, the production of means of production is the production of means of producing means of consumption, final goods and services that are consumed by human beings, mainly workers who are the vast majority, which use this energy to go to work the next day, and produce. Workers spend wages on means of subsistence, including houses, but with government's spending taxes and loans on means of destruction and killing, those commodities fall outside productive consumption.

The Republican Party in the 1950s took over from the Democratic Party the policy of government spending on weapons of mass destruction, making the arms systems industrial production of means of destruction and killing the cornerstone of American capitalism, thus the need for Cold War anti-communism, McCarthyism and Reaganism. American patriotism and anti-communist pulpit propagandists, movies, cartoons, and so on saturated American religious as well as secular and political cultures, to justify the US government's massive tax and borrowing policies to purchase capitalist manufactured weapons of mass destruction.

At the end of his Presidency, General Dwight D. Eisenhower said:

Our military organization today bears little relation to that known by any of my predecessors in peacetime, or indeed by the fighting men of World War II or Korea. Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the militaryindustrial complex.

During the 1950s post war boom capital accumulated and strong unions won wages and benefits, and in the 60s Johnson's Great Society agenda put in place a war on poverty, providing food stamps, aid to families with dependent children, Medicare and job training for inner city youth and adults. But, from the 1970s and into the 80s, the government deficits from military spending contributed to rounds of inflation, and the periodic recessions, which came to be called "stagflation".

Reagan and Buchanan, together with the Christian Coalition and "Family Research Council' waged an implicit (encoded) racist/sexist campaign of blaming government deficits on liberal Democrats and their "tax and spend" welfare projects. Southern Democrats and Republicans blamed the deficits on "welfare" payments, talking about promiscuous girls having babies to inherit welfare from their mothers - "welfare queens" - (ghetto queens) and denouncing "dead beat dads". This theme was taken up by the "New Democrats" - the Clinton-Gore-Nunn "Democratic Leadership Council", Bill Cosby and Barak Obama as "telling it like it is", blaming Blacks for government borrowing deficits owed to finance capital.

Of course, beginning with Reagan, the politicians and ideologists, wanting to divert money from social programs to the "military-industrial complex", present themselves as "compassionate" and throwing single moms from welfare and into homelessness are doing so for the good of these turned out women and children!

Published: February 5, 1986

President Reagan said tonight that his Administration would search for new ways to help poor people ''escape the spider's web of dependency'' on Government welfare programs. In his State of the Union Message, Mr. Reagan also said he wanted to find ways for the Government and private industry to work together in providing insurance to protect people against the costs of ''catastrophic illness.''

Neither domestic policy initiative would have any visible effect on spending levels in the President's budget for the fiscal year 1987, which he sends to Congress on Wednesday. But they could lead to changes in later years.

''We must revise or replace programs enacted in the name of compassion that degrade the moral worth of work, encourage family breakups and drive entire communities into a bleak and heartless dependency,'' Mr. Reagan told Congress. Reagan Uses Roosevelt Warning ''In the welfare culture,'' he said, ''the breakdown of the family, the most basic support system, has reached crisis proportions - in female and child poverty, child abandonment, horrible crimes and deteriorating schools.''

Mr. Reagan quoted President Roosevelt, from his report on the State of the Union on Jan. 4, 1935, as warning that welfare was ''a narcotic, a subtle destroyer of the human spirit,'' and the President declared, ''We must now escape the spider's web of dependency.The President's 1987 budget would continue the rearrangement of spending priorities begun in Mr. Reagan's first term. Military spending, which accounts for 27.1 percent of the Federal budget this year, would rise to 28.4 percent of the total next year and 32.6 percent in 1991.

I must point out in passing, and not be distracted into this metaphysical red herring, that welfare is a social economic program, and not a medical treatment for the human body, such as an addictive pain pill. The "human spirit" is not an economic category, and in fact has no empirical existence, so, if it exists, is outside the realm of economic empirical data. Neither Roosevelt, Reagan nor Patrick Buchanan even defined it, but use the unbodily spook to justify the empirical destruction of human beings and communities in hunger, poverty and squalor.

These individuals are not caught in a "spider's web of dependency", a bullshit red herring in the form of a metaphor, but are human beings dependent upon food, clothing and shelter, deprived of it in a web of poverty and distitution. What they need to escape are these conditions, but cannot do so in context of capitalist commodity production by wage labor, which directly engenders unemployment, poverty and squalor. The working classes have to take control of Society, expropriate the productive forces and plan an economy freed from wage labor, capital, commodity production, anarchy in production, poverty, distitution and squalor.

That said, let us leave the spooks and spirits, spider's webs and the other red herrings to return to the real economic discussion of the present economic crisis, its historical causes. In this instance we were discussing the permanent arms economy and its failure to prevent another depression. The flaw in the permanent arms economy is that, whereas the circuit of capital in commodity production is predicated upon developments in production of means of production for production of means of consumption is productive consumption of the factors of production - land, labor, means of production (tools, raw materials, labor) objectified labor values of the products qua commodities, which consequently are consumed either in further labor processes or by human consumption as means of subsistence or luxury, which enables them to return to the labor process to produce more means of production and subsistence, and repeatedly reproducing real value and money wealth circulating commodities. This was not and is not the case with the permanent arms economy of production of means of destruction and killing, where the sole buyer is the government and the use value of these objects - ICBMs, B52s and nuclear subs - cannot be used without destroying all of humanity or civilization by thermonuclear war.

This, the real reason for the present collapse of capitalist commodity production and appropriation in America was revealed by and was evident from the moment that the Nixon Administration was forced to go off the gold standard and simultaneously slap on wage-price controls. So, what was the real function of Milton Friedman, the Chicago School and Alan Greenspan?

Prior to the 1929 collapse of finance capital, characterized by the run on banks, and the onset of the Great depression which followed, up until the Roosevelt Administration gold coins, embodying value as crystlizations of socially necessary labor time, circulated freely as legal tender in the medium of exchange, and gold bullion was owned by banks and other private individuals. But, in response to the financial crisis and the Depression, the Roosevelt Administration's New Deal included provisions which banned gold from its function as money (circulation of commodities) and made ownership and use of gold as money illegal.

All gold money in circulation was seized by the government in 1933, which were exchanged for dollars at the fixed rate of $20.67 an ounce. That was the gold standard prior to the inflationary government purchasing of means of destruction and killing from the war industries by borrowing and printing policies of World War II. By the Bretten Woods conference in 1945, the price of gold was to be fixed at $35 an ounce since.

World War II enabled the US to emerge as the only majory industrially intact economy. It had advanced technology in the war related industries, which spread to other branches of industry, throughout the economy, resulting in the post-war boom. But, American capitalists, industrial and finance capital, were at the time also manufacturing commodities, capital goods and others, that were shipped to Europe and purchased there, in part funded by the Marshal Plan, to rebuild war ravaged Europe.

The German and Japanese economies were for the most part prevented from re-arming, therefore most of their investment capital was in production of means of production and infrastructure, on the one hand, and production of means of subsistence on the other. As these, and other European and Asia Pacific economies grew stronger, the balance of trade was revised from US dominance to challenges from Germany and the European Economic Community, Japan and South Korea. These nations wanted trading in gold, in addition to or rather than paper currency. In the second week of August 1971, the British ambassador turned up at the Treasury Department to request that $3 billion be converted into gold.

"... The climax came on August 13-15, 1971, when Nixon and 15 advisers repaired to the presidential mountain retreat at Camp David. Out of this conclave came the New Economic Policy, which would temporarily -- for a 90-day period -- freeze wages and prices to check inflation. That would, it was thought, solve the inflation-employment dilemma, for such controls would allow the administration to pursue a more expansive fiscal policy -- stimulating employment in time for the 1972 presidential election without stoking inflation. The gold window was to be closed. Arthur Burns argued vociferously against it, warning, "Pravda would write that this was a sign of the collapse of capitalism." Burns was overruled. The gold window would be closed. But this would accentuate the need to fight inflation; for shutting the gold window would weaken the dollar against other currencies, thus adding to inflation by driving up the price of imported goods. Going off the gold standard and giving up fixed exchange rates constituted a momentous step in the history of international economics.

Stagflation was directly related to the arms economy, and the arms economy to competition with the Soviets. The Nixon-Ford administrations ended the war in Vietnam, opened trade with China and established strategic arms limitation talks with the Soviet Union, as means of diverting from this reckless economic strategy. Also, the Democrats, represented by the Carter Administration recognized the bankruptcy of the economic strategy of feeding the arms economy.

The war in Vietnam didn't bring the kinds of "dividends" to the economy as had World War II, and the Korean War which was directly related to rebuilding Japan's modern economy. The returns brought back to America from its war against the Vietnamese national liberation movement and peoples, were coffins, maimed cripples, broken men physically and spiritually, and more importantly, from the standpoint of capitalists, inflation.

By the mid-1960s, the Civil Rights Movement and the urban ghetto rebellions, on one hand, and the hippies and anti-war movements on the other, had broken the grip of brain washing anti-communism, and the youth identified with the Vietnamese, and with the Chinese "cultural revolution". In 1968, the black communities of the United States, following the assassination of Martin Luther King Jr, simultaneously experienced urban worker's rebellions in over a hundred cities, the Tet Offensive in Vietnam, the students protests in Mexico City and the French proletariat's May-June General Strike.

The Nixon Administration was focused on the economic problems resulting from over extended U.S. imperialism's vested military-industrial complex, and its effect on the overall economy. Politically, his task was slowing the arms race and detante with the Soviet Union, economically, the opening up of China to American commodities and investments. To do this, Nixon, and then Ford, had to end the US occupation in Vietnam, which they did. This also ended the anti-war movement, even as police and FBI agents destroyed the cadres of the Black liberation movements.

The Carter Administration inherited the economic mess of the period, but also the Nixon Detante and relative social peace which resulted from repression. However, Ronald Reagan was a madman, a true believer.

Reagan was a true believer, a racist and Christian white nationalist, represented ideologically by the likes of Patrick Buchanan politically, and Jerry Falwell and Pat Robertson's version of American white Anglo-Saxon Protestant majoritarianism religiously, they attacked single moms and welfare in the name of "family values" (patriarchal monogamy) and the "work ethic" as "traditional American values" that [supposedly] 'made America great', and attacking feminists, abortion, gays and lesbiens as their domestic rants, but at the same time as attacking this domestic 'secular humanism' and 'evolution', these pulpit propagandists went on the theo-ideological offensive by promoting Zionism and the US support of Israel as Bible prophesy, together with anti-communism combined to justify the continuation, nay acceleration of the permanent arms economy to fight the Soviet "evil empire" of "Gog and Magog".

This diversion of attention to the nether world of patriotism and Zionism mixed with racism was used demagogically to justify budget deficits by attacking single moms on welfare on one hand as its cause, but at the same time justifying feeding tons of taxes and borrowed cash into the military-industrial complex on the other. In addition to taxes and borrowing for military spending, these "fiscal conservatives" were also giving tax cuts to capitalists, and to themselves, which also increased the deficits.

It was Ronald Reagan who wanted to revive by expansion the failed government borrow and spend projects of World War II procurements of now technologically advanced and very expensive means of destruction and killing. This he wanted to do while at the same time cutting capital gains taxes and other taxes paid by the wealthy to finance their so-called "supply -side" economics in contrast to Keynesian "demand side" New Deal economics and by throwing families with dependent children off welfare.

The religious and political right diverted to attacks on Black Americans as good for nothing, lazy "welfare bums" and "ghetto queens". They, not the military-industrial complex, were blamed for high taxes of "hard working, white American men". This is where Pat Buchanan cut his ideological teeth, as the chief ideologist in the Reagan Administration, and this is the flavouring of the racism in his article below: he blames Blacks and Chicano bums for the current economic crisis, and does so by blaming Democratic Party politician liberal Nigger lovers and Republican Party Hispanic caterers as "forcing bankers" to provide homes and mortgages to those irresponsible, shiftless Black and Brown families which had the gall to want to move from inner city slums to "white folks" suburbs.

So where is Buchanan's criticism of the failed system of capitalism in this? There is none. Instead there is his usual racist shanghaiing of the issue in his red herring blaming Black and Brown Americans for the economic crisis.

The real failure in the housing crisis is that the buying power of American workers has declined. The value of socially necessary labor time must equal the prices of means of subsistence - food, clothing and shelter required - the 'cost of living - for the continued existence of workers and their families. This includes housing. The fact that workers are unable to maintain housing for their families exposes the fundamental flaws in the system of capitalist commodity production by wage labor in America.

So, whose wealth is being wiped out, and by whom? It is bourgeois wealth, investment capital that is being lost by declining rates of profits, that is reflected on Wall Street in falling prices of stocks. Whether or not African American and "Hispanic" American workers, or Joe Sixpack for that matter, are defaulting on mortgage payments is in no way the cause of the stock market crash, or the collapse in finance capital today, then they were of the failed savings and loans of the 1980s.

I have already mentioned socially necessary labor time relative to gold as money in context of GDP, standard of value and universal equivalent in the circulation of commodities. Money is a medium of exchange of products and payment for services. Socially necessary labor time is quantified in terms of the total number of hours and minutes of the labor expended during the working day, including overtime, work week, month and the year that constitute the GDP with respect to products.

Commodity value as embodiments of value of externalized socially necessary labor time's value constitute the basis for the prices of those commodities, which prices fluctuate by supply and demand, i.e. competition between sellers and between buyers. Profits made by capitalists comes from the forcing the proletariat to work surplus of hours of unpaid labor, that is surplus labor in execess of paid socially necessary labor time.

But, before capitalists can turn surplus produce embodying surplus value into profits and reinvest in capital accumulation, all the products most be sold to cover the costs of production and enable the realization of surplus value as profits, money in execess of the cost of production. Capital accumulation is derived from appropriation of proletarian labor power based on ownership of this purchased labor power the exploitation of these workers by putting them to work in the labor process. But the commodities must be sold. This includes the construction industry and the housing markets.

When there is overproduction and corresponding layoffs, aggravated by collapses in finance capital and freezing of credit, such as now, it is called a recession, "deep recession" - a Depression. That markets are glutted and commmodites cannot be sold constitute however the crisis in the production economy, and is expressed on the stock exchange. The housing crisis is a crisis in construction industry, overproduction of houses, which could not be sold. This is the real reason that the Fannie May and Freddie Mac schemes of selling houses to poorer workers came into play, and not because Democrats are helping "African-Americans", or Republican politicians "helping Hispanics" to respectively purchase homes they couldn't afford. The problem is systemic and is not caused by bank failures to recoup housing loans, but is an epidemic that is part and parcel of the very system of capitalist commodity production on the basis of exploited wageworkers.

Lil Joe


Systemic Failure
by Patrick J. Buchanan


As the U.S. financial crisis broadens and deepens, wiping out the wealth and savings of tens of millions, destroying hopes and dreams, it is hard not to see in all of this history's verdict upon this generation. We have been weighed in the balance and found wanting. For how did this befall us, save through decisions that brushed aside lessons that history and experience had taught our fathers?

It all began with the corruption called sub-prime mortgages.

The motivation was not wicked. Democrats wanted to raise home ownership among African-Americans from 50 percent to the 75 percent of white folks. Rove Republicans wanted to do the same for Hispanics.

Banks were morally pressured by politicians into making home loans to folks who could not remotely qualify under standards set by decades of experience with mortgage defaults.

Made by the millions, these loans were sold in vast quantities to Fannie Mae and Freddie Mac. There they were packaged, converted into mortgage-backed securities and sold to the big banks. The banks put scores of billions of dollars worth on their books and sold the rest to foreign banks anxious to acquire Triple-A securities, backed by real estate in America's ever-booming housing market.

Computer whizzes devised exotic instruments -- derivatives, which could soar in value, making instant multimillionaires, but also plummet, based on rises and dips in the underlying value of the paper.

Came now young geniuses at AIG to insure the banks against catastrophic losses, should the U.S. housing market crash. As the risk was minuscule, premiums were tiny. Payouts, however, should it come to that, were beyond AIG's capacity.

In AIG's Financial Products division, based in Connecticut and London, brainiacs were creating other exotic instruments, such as credit default swaps to guarantee against losses and insure profits. To keep these wunderkinds at AIG, they were promised million-dollar retention bonuses.

Who kept the game going?

The Federal Reserve, by keeping interest rates low and money gushing into the economy, created the bubble that saw housing prices rise annually at 10, 15 and 20 percent.

As the economy grew, however, the Fed began to tighten, to raise interest rates. Mortgage terms became tougher. Housing prices stabilized. Homeowners with sub-prime mortgages now found they had to start paying down principal. People losing jobs began to walk away from their houses.

Belatedly, folks awoke to the reality that housing prices could go south as well as north, and all that paper spread all over the world was overvalued, and a good bit of it might be worthless.

And, so, the crash came and the panic ensued.

Who is to blame for the disaster that has befallen us?

Their name is legion.

There are the politicians who bullied banks into making loans the banks knew were bad to begin with and would never have made without threats or the promise of political favors.

There is that den of thieves at Fannie and Freddie who massaged the politicians with campaign contributions and walked away from the wreckage with tens of millions in salaries and bonuses.

There are the idiot bankers who bought up securities backed by sub-prime mortgages and were too indolent to inspect the rotten paper on their books. There are the ratings agencies, like Moody's and Standard & Poor's, who gazed at the paper and declared it to be Grade A prime.

In short, this generation of political and financial elites has proven itself unfit to govern a great nation. What we have is a system failure that is rooted in a societal failure. Behind our disaster lie the greed, stupidity and incompetence of the leadership of a generation.

Does Dr. Obama have the cure for the sickness that ails the republic?

He is going to borrow and spend trillions more to bring back the good old days, though it was the good old days that brought us to the edge of the abyss into which we have fallen. Then he is going to spend new trillions to give us benefits we do not now have, though the national debt is surging to 100 percent of the Gross National Product, and may reach there by 2011.

Is Obama willing to speak hard truths?

Is he willing to say that home ownership is for those with sound credit and solid jobs? Is he willing to say that credit, whether for auto loans, or student loans, or consumer purchases, should be restricted to those who have shown the maturity to manage debt -- and no others need apply?

"Avarice, ambition," warned John Adams, "would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution is made only for a moral and religious people. It is wholly inadequate to the government of any other." In this deepening crisis, what is being tested is not simply the resilience of capitalism, but the character of a people.

Mr. Buchanan is a nationally syndicated columnist and author of Churchill, Hitler, and "The Unnecessary War": How Britain Lost Its Empire and the West Lost the World, "The Death of the West,", "The Great Betrayal," "A Republic, Not an Empire" and "Where the Right Went Wrong."

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