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Monday, March 9, 2009

President Obama, Whose Free Market?

President Obama continues to capture the audience. The Republicans have resorted to Bobby Jindal, and that did not turn out too well. Now, they are inciting tea parties. Do you get finger sandwiches with that? I am not sure it makes much sense. Former Little Boy Bush doubled the national debt while president. He ushered in a massive housing bubble that broken spreading recessionary fallout all over the nation causing homeowners to run from their nests by the millions; manufacturing companies began to lock up their doors and pull the blinds; working people were checking their mailboxes only to find letters saying their retirement savings got contaminated for life; 36,000 laid-off workers per week have been roaming the streets desperate for answers; all occurring as the fallout from the Bush presidential legacy drifted all across the globe. Yet what we hear from the Republican Jihadists is that President Obama must NOT spend money to help working Americans come out from under their desperation. It is all their fault and no one else is to blame. So now, the Republican Jihadists are hosting tea party protests to complain that the new budget is too high and the stimulus costs are too much. Did any of these naysayers ever tell Little Boy Bush, or Johnnie-man-to-the-rescue-McCain, as he ran to the Senate floor during the presidential campaign, that the Toxic Asset Relief Program (TARP) was a bad idea and the bankers need not get handed $700B to squander on fancy plane rides, and lavish luxury pay bonuses? I guess not. I guess all of this is Barack Obama’s fault. He is the big bad wolf in a nice tailored suit with a commanding presence. And, of course, don’t forget that he can give a darn good speech, too. Wow! He can even articulate what the problems are and what his plan is, even though there are many who do not agree with the objectives.

My problem with President Obama is that because of his economic plans, he continues to stand too far in the middle for my taste. I do believe he could be setting himself up for a big fall that will damage the Democratic Party if he is not careful. He is taking too long to move in more aggressive directions to salvage our very damaged economy.

I have to ask, what free market system does he support? Free, as in free from bondage enforced by the predatory private power brokers? Or, a neo-liberal free-for-the-taking-market? Free as a bird? The free lunch counter type of market where it is all you can eat without getting a check, but the cook pays the customer as a thank you for allowing him to be in the free market economy? A market free from regulation, and controls, and along the way, given a free hand to create an economic monopoly. Free from as much competition as possible. As Professor Michael Hudson wrote in his 2-24-09, article, “The Language of Looting”--

“…today’s “neo-liberal” advocates of “free” markets seek to maximize economic rent—the free lunch of price in excess of cost-value, [and] not to free markets from rentier charges. [Or] attempts to regulate “free markets” and limit monopoly pricing and privilege [which] are conflated with “socialism”, [and] even with the Soviet-style bureaucracy. The aim is to deter the analysis of what a “free market” really is: a market free of unnecessary costs: monopoly rent, property rents, and financial charges for credit that governments can create freely.”

What I believe he is saying is that through monopoly and debt-finance economic principles, of which our mega-corporate and financial systems have been freely enjoying without much interruption from The Regulatory Enforcers, most of us working in small and moderate sized business enterprises, and those who own them, have felt significant downward pressures that high rents, and compounding bank finance charges have squeezed against their limited profit margins, ability to expand, engagement in research and development projects, opportunities to increase wages and benefits, and/or hire new employees, thus, might find themselves pushed outside of the competitive playing field by those heavy power brokers controlling the monopoly and financial capitalist economy. This world ain’t big enough for the both of us, pal!

Professor Hudson also wrote that those progressive economists living a century ago would never have thought that “a world run by venal and corrupt bankers, protecting as their prime customers the monopolies, real estate speculators and hedge funds whose economic rent, financial gambling and asset-price inflation is turned into a flow of interest in today’s rentier economy. Instead of industrial capitalism increasing capital formation we are seeing finance capitalism strip capital, and instead of the promised world of leisure we are being drawn into one of debt peonage.” (Rentier is defined as someone who has a fixed income, as from stocks, land, etc.)

We have watched this happen over the last 30 plus years, as industrial capitalism diminished in its usefulness as a prime economic generator of wages, and products to be used domestically and exported, as well as a major source of revenue for the federal Treasury, state and local governments, giving meaning, value and prestige to a product-dollar-based currency. A currency given value through the production of real tradable and tangible goods had been gradually upstaged by our current esoteric, paper-generated-based financial capitalism economy (40% of our GDP) funded through securitization and the interest payments received from such debt, or as some would call assets, has now significantly disappeared into the wild blue yonder. Most of our production has been handed over to rising industrialized developing nations. More than likely not to be seen again unless dragged back onto our own soil kicking and screaming from those monopolistic capitalists very happy to have them operating elsewhere and far away from unions, U.S. government scrutiny, regulation and laws. This is President Obama’s most important dilemma from my point of view. What type of “free market” does he wish to establish under his presidency? Is he more in favor of debt-asset values replacing product-asset values?

Professor Hudson asks, “Exactly what does a free market mean? Is it what the classical economists advocate—a market free from monopoly power, business fraud, political insider dealing and special privileges for vested interests—a market protected by the rise of public regulation from the Sherman Anti-Trust law of 1890 to the Glass-Steagall Act and other New Deal legislation? Or, is it a market free for predators to exploit victims without public regulation or economic policemen—the kind of free-for-all market the Federal Reserve and Security and Exchange Commission (SEC) have created over the past decade or so? It seems incredible that people should accept today’s neo-liberal idea of “market freedom” in the sense of neutering government watchdog. [And] loot without hindrance or sanction, plung[ing] the economy into crisis and then use Treasury bailout money to pay the highest salaries and bonuses in U.S. history. [And] when neo-liberals use the word “nationalization” they [really] mean a bailout, a government giveaway to the financial interests.” (All [ ] had been inserted by this author.)

Professor Hudson wrote further in a terrific enumeration that “Today’s clash of civilization is not really with the Orient; it is with our own past, with the Enlightment itself and its evolution into classical political economy and Progressive Era social reforms aimed at freeing society from the surviving trammels of European feudalism. What we are seeing is propaganda designed to deceive, to distract attention from economic reality so as to promote the property and financial interests from whose predatory grasp classical economists set out to free the world. What is being attempted is nothing less than an attempt to destroy the intellectual and moral edifice of what took Western civilization eight centuries to develop, from the 12th century Schoolmen discussing Just Price through 19th and 20th century classical value theory.” “Any idea of “socialism from above” in the sense of “socializing the risk”, is old-fashioned oligarchy-kleptocratic statism from above.”

So, where will President Obama take the nation and all of us inside it riding the bus with him and his Inner Circle? I surely hope it won’t be over the cliff, but instead, down a road that maybe rutted and bumpy, which will require skilled steering and navigation, so as to end up on the road that will lead us into a new, and balanced mature economy that protects workers, worker rights, while freeing the nation from its grip upon fossil fuels by embracing sustainable energy and agriculture, with available health care for all, and sustainable job opportunities working in manageable industries, with regulated investments, without wars, and bloated defense and security department budgets. We have to ask, “So Mr. President, where are you taking us? And, what type of free market are you choosing?”

Thanks for reading, jerry


solbama said...

"A nation divided against itself shall not stand" : "Divide and concur" : "Us and Them" : "Democrats and Republicans"
Jerry, you know OZ is behind the curtain, and the puppet master pulls the strings and diverts our attention - your wit is astounding and it's time to take it to the next level. What can make us free?
Reality presents a dualistic nature, which, is yet a presentation. Do I study Shakespeare or his play?
I love your work, keep it happening!

carlandjerry said...

Hi there Solbama,

I am not sure the OZ puppet masters are all that smart. It appears they screwed things up real bad, whereby the economies of the major industrialized nations are faltering destroying values of most tangible goods: from homes, to factories to assets, and even gold will bubble up and break. I really don't believe that these illustrious Actors can really control what is in store for the world. They had more power when the world was more simple, and people were less connected. Today, people are more informed and and communicate with one another in seconds.

Thank you so much for your kind words and support. jerry

solbama said...

Appearences are often deceptive- I'm not suggesting things aren't screwed up, but if part of the play is to bring the world economy to it's knees, then "they" didn't screw up, but merely screwed us up for their purposes.
I do agree that the internet is a good thing when used for good things. But, the sheeple are many and the shepards are few.

carlandjerry said...

You maybe right that the world players had a plan to bring us to their knees. But it isn't working. The world is angry and protesting everywhere wanting heads. It will happen here too. Like I said before, I don't believe the Oligarch Kleptocrats around the world are all that smart. Whatever they live, most inherited it, therefore they are not very bright, since all they have done with their lives is spend lavishly on themselves and attend parties their entire life.

Anonymous said...

If you think Obama wants to take our country towards free markets then don't hold your breath. He is sprinting away from anything that could even resemble freedom. You should be asking where Nancy and Harry want us to go, Obama is their PAWN currently.

When you talk about the conservatives not taking Bush to task over his spending it just proves you live in your on little world. Why do you think the republicans lost the last few elections!!! Conservatives don't vote because of the letter beside your name like Liberals do.

carlandjerry said...

Anonymous--I am not sure I understood what you were trying to say?

Bush brought about the worst economic disaster this nation has seen since the Great Depression, and possibly worse. The Republicans were the most active capitulators in allowing Bush to deregulate, encourage a Shadow Banking system, drive the national debt to nearly $11 trillion from $5 trillion when he took office, engage in $500B wars in the Middle East, expand the Pentagon's budget to the largest in the world even when combining all the nation's military budgets, bloat the Homeland Security budget, bloat no-bid contracts, and the list goes on. Bush is a traitor, and so are the capitulators! Where is the Grand Jury investigation? All these neo-con uber-bankstas are traitors, too. They purposefully designed the neo-liberal, Alan Greenspan approve Ponzi scheme gaming the nation's wealth.

You wrote, "Conservatives don't vote because of the letter beside your name like Liberals do." What does that mean? Conservatives have totally voted along party lines from the start of the Bush administration to date. Democrats are the split party. That is why there is the Blue Dog coalition!! They vote conservatively. Obviously, you don't know your politics very well. I think if you learned more instead of listening to the Neo-con propaganda machine you might do better for yourself.

The conservatives did not take Bush to task over his spending because they consistently gave him their vote.

Reed and Pelosi are not the puppet masters playing Obama. Where do you get that? Obama has the pen!! He has already been calling them out. What are you watching? You get your news from O'Reilly, Limbaugh, Jim Cramer? He said he is done with the irrelevant earmarks. He has set the political agenda, like it or not. And I am critical of it, but nonetheless, he has set the agenda. Free market continues in some form, otherwise you couldn't do business. The government MUST take control over the financial system, since private enterprise failed in making it work.

Anonymous---there never has been a free market in this country. It has been a Nanny State for the top 10-20% on the economic ladder. The working business owner has been victimized by their rules, such as those set in regards with over-the-top rents, high insurance premiums, compounded interest payments, and more. When the country is ruled by monopoly-debt financial capitalists outsourcing jobs personal savings deposits, retirement investments and capital obtained through the Treasury and Federal Reserve (taxpayer), then the playing field for the domestic product-based capitalist is undermined.

What are you watching? It is clear that you have been drinking the Kool-Aid way too long!


Paolo DePetrillo said...

I think it's somewhat simplistic and historically incorrect to place the blame solely on Bush for our current economic unpleasantness. Greenspan began his tenure as Chair of the Fed in 1987, and his one politically applauded ongoing act was to keep interest rates below the real level of inflation to cover for the mistakes of his banking colleagues. And, of course, to send more business their way. When the dollar began to fall in the mid-90's, Goldman Sachs and many of the rest of the money center banks had huge outstanding loans to Latin America and Asia. Lloyd Bentsen, then Treasury Secretary, wanted to allow the dollar to fall to address our current account deficit by helping our export industries. Greenspan helped to pressure him out of office and Robert Rubin, previously at Goldman Sachs, was brought on board to replace Bentsen. Rubin cooked up the "strong dollar policy." He traveled to Asia numerous times to reassure Asian governments that indeed, the US would not see them propping up our currency as a mercantilist trade attack, but would instead welcome it and work with them to maintain it. Voila, the dollar began to rise, foreign loans to the US money center banks were now safe, and so was the possibility that these same outfits could now invest in Asia without worrying about US current account deficits and their effects on our currency. The irony is that these hypocritical champions of the free market interfered with normal currency flows in response to current account deficits so as to increase their foreign return on investment. While screwing American industry as it was essentially saddled with a 40% export tariff because of the artificially supported dollar. When countries in Asia, Latin America, and Eastern Europe, like Russia, suddenly found their US dollar loans had appreciated by 40% and had to be paid back with more of their local currency, they went into crisis. Recall that Greenspan solved this crisis by guaranteeing those foreign loans from Rubin's friends using Brady bonds. Even then the Masters of the Perverse could do no wrong. Summers simply continued these policies, and we heard how swell globalism was going to be for our "New Economy." Which was a code word for massive loss of manufacturing jobs to be replaced with lower wage service sector jobs under Clinton's watch. The Democrats politically benefited from low interest rates and low inflation as a result of Rubinomics. But the money center banks reaped the major benefits as 300 million people were economically screwed for the benefit of 30,000 Hamptonites. Bush simply continued these policies, and Greenspan was always there to blow another bubble for him and his party. From to real estate to now Treasury bonds. Greenspan handed off to Bernanke who would simply follow Greenspan's easy money act. I'm sorry for such a long post, but I think it is important in this time of crisis to honestly appraise the responsibility of both parties and their leadership for their contributions to its genesis. Otherwise, we'll simply fall back on partial partisan solutions that are futile, consume valuable resources and do not address the basic issues. I enjoyed reading over your blog. Hopefully, from your efforts, an educated public will be better equipped to force the leadership into making the right decisions to address the crisis.

jerry said...

Paolo, you made excellent points!! Thanks for the education, as well. I totally agree with the historical outline of how it all began with Reagan. I have written about that in previous postings. My point, and I have not put the entire blame on Bush's head, has been that once the Commodity Futures Modernization Act and the axing of the Glass-Steagall Act Bush allowed a free-for-all to go forward through the Shadow Banking System ratcheting up the selling of over-the-counter derivatives and credit default swaps totally worldwide $1000 trillion.

Bush is culpable and is responsible as much as anyone, and really, more because the economy began to fall and he did not do anything to stop it.

thanks, jerry

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