Monday, December 24, 2012

Globalization: The Next Step — Wiping Out the Savings of the Middle Class

The poor don't save, or if they do they don't save much for the obvious reason that they have little to save from. The rich don't save, they invest. Which means that saving cash for the future, for a rainy day, for illness or retirement is a middle-class virtue and in the age of the New World Order, an invitation to theft. Theft by the monied interest, that is, operating through the governments and central banks that they own.

How is such theft possible?

Bank of Canada Governor, Mark Carney, soon to take up his new post as Governor of the Bank of England, has given as clear an understanding of how the swindle will be perpetrated as can be expected from a public source, openly musing about central banks targeting, not inflation, but GDP.

What's it mean?

Central banks traditionally had one instrument with which to influence a national economy; namely, interest rates. When a credit-fueled real estate or consumer spending boom threatened to drive demand in excess of supply thus causing prices to rise, central banks would raise interest rates, thereby slowing bank lending and heading off a major inflation. Conversely, when a contraction in demand threatened a recession, central banks lowered interest rates to stimulate borrowing, and hence demand.

But there's trouble when demand flags or fails to rise when interests rates are already close to zero. If people won't borrow to spend when interest rates are zero, whaddya do? Whereas, the central bank can rein in borrowing by raising interest rates, they cannot force people to take loans however low interest rates fall.

Or, as the bankers like to say, you cannot push on a piece of string. But wait: what if you make interest rates negative? Yeah: borrow a buck and pay back 50 cents in seven years time. Only a fool would refuse the offer. Right?

QE V. 1.0. Image source
But folks won't deposit their cash with a bank that nicks 10% of their money every year. True, but what if the central bank prints a bunch of cash, and give it out to all and sundry — large corporations, hedge funds, Wall Street banksters, and all those folks who'd like to buy a car, a home, take a holiday, but who have no cash. That's the new instrument of central banking. QE, quantitative easing, conjuring money out of thin air and handing it out to all and sundry: the government for stimulus spending, to bankers with "troubled assets," to Government Motors, Chrysler, windmill makers and every other friend of government.

Soon you've got the economy going again: everybody's buying and investing in real things, houses, factories, big box superstores, whatever. And the big debtors know that when it comes time to pay the money back it will be worth much less than when they borrowed it, even after they've added in the ongoing interest expense.

But this is really not for the little people. Once the inflation's ignited, interest rates will be raised. Not enough to compensate for the loss in the value of your savings, of course. But enough to prevent reflating the housing bubbles, and to prevent the plebs from buying more than the bare necessities of life from the big box importers of cheap Chinese stuff. And enough to prevent the average middle-class devotee of thrift from realizing how badly they are being gouged — especially after the measly interest they earn on their devalued savings has been taxed at their marginal rate of 40 to 50%.

So if you've got GIC's or money sloshing around in a credit union account, or maybe a wad of those nice new plastic Canadian fifties or  hundreds stashed under the mattress, get ready to see it all shrink in value.

For the monied interests, the proprietors or the New World Ordure, the universe is unfolding as it should. The consumer society, the vision of which brought down the Soviet Union, the economic miracle of which we in the West proudly assumed to be the mark of Western superiority, will soon be a thing of the past.

And as the billionaires so reasonably assert: it's no good having the plebs louse up the place with their ugly suburban villas, while choking the roads and poisoning the atmosphere with their SUV's.  No, the thing is to export those overpaid Western jobs to the slave plantations of Asia, and bring millions of Third Worlders to the West, where they will be content to work at minimum wage or less, without any silly nonsense about the great Western tradition of respect for human rights and freedoms.

This phase of the unfolding of the New World Order is spelled out in a report for CEO's now in circulation. The economic problem of the day, the report states is excess debt. Much of this debt the report says will never be repaid. Hence the conclusion:
Holders of the debt, be they countries or companies, should be allowed to default, whatever the short-term pain of such a process.
Note, no suggestion of debt relief for the little people overloaded with mortgages and car loans. No, no, certainly not. On the contrary, the report asserts:
 ... retirement ages will have to increase. People will have to work harder, for longer and should be encouraged to do so by changes in benefit[s]
Ha! There goes yer sick pay, you malingering bum, there goes yer food stamps, yer workshy layabout, there goes yer pension you thought you'd paid in for. What's more:
The size of the state should be radically reduced and immigration encouraged. Competition in labour markets through supply-side reforms should be pursued. 
Ha ha! That'll show you, just how much we need you — not at all! We're gonna bring in millions and millions of foreigners who will swamp your working class neighbourhoods, and impose their religions and cultural habits on your community whether you like it or not. It's called genocide and that's the policy of the New World Order, aka the hypercapitalist entity that owns the political leadership of the Western States.

See also:

 What Millions Want For Christmas: A Job
The latest jobs reports shows there are over 12 million people unemployed [in the US], the average duration of unemployment is over 40 weeks, and over 40% of the unemployed have been unemployed for over 27 weeks.

Another 8 million people want full-time jobs but only have a part-time job. And finally, unemployment stats do not capture millions more who are so discouraged they stopped looking for jobs.


  1. Governments swindling the middle classes have little to do with globalization. My grandmother and a million others were swindled by the UK government when in a verve of patriotism, despite the fact that she was a pacifist, she foolishly bought ww1 war loan only to see much of its value disappear over the years. Government has long had a habit of stealing middle class savings through inflation -- sometimes just a portion of savings, sometimes all of it as in Weimar -- but it has little to do with globalization, and a lot to do with too much debt. Belatedly Merry Xmas.

  2. "Government has long had a habit of stealing middle class savings through inflation"

    That's true but it doesn't mean that the next round of money printing is unconnected with globalization. To validate your argument you have to show how else the West can bring wages in line with those of the Rest — And bring them in line they must if they wish to end mass unemployment and combat the increasing risk of violent insurrection.

    But I understand that, as a liberal and therefore a globalist, you are unable to confront the challenge that the West, and particularly Europe with its high wage structure, now faces.

    1. I don’t disagree with you that globalization as we have seen it faces a crisis, and one that has to be solved as the terms of international trade cannot continue as they are today. Where I disagree with you is on the reason for this crisis.

      To my mind global free trade on the laissez-faire model tends to provide the greatest benefit all around, with some exceptions. But one has to have a level playing field – laissez-faire for everybody and not just for the West – and this is what we haven’t had. Some countries (China, etc) have artificially managed their currency rates to make their exports to us cheaper and their imports from us more expensive thus giving themselves a huge trade advantage. Others such as the Japanese keiretsu system have formed cartels to artificially subsidize their export prices (at the expense of prices in their home market) while also using non-tariff measures to curtail imports.

      In short, the problem has been a lack of a level playing field with regard to the West’s terms of trade with the East – We in the West have practiced free trade, whereas the East has practiced mercantalism. The fault lies with our politicians who have failed to ensure fairness in the terms of trade. By blaming the East (for the resulting unemployment and underemployment) we let these political windbags off too easily.

  3. To my mind global free trade on the laissez-faire model tends to provide the greatest benefit all around, with some exceptions

    The exceptions in this case being the 99% in Europe and America, who have seen their net worth hit a 43-year low and their real income sharply cut as a direct result of their labor being undercut by the slave plantations of Asia and elsewhere, while the net worth of the 1% in America increased by $1.7 trillion in the last year alone.

    The fault lies with our politicians who have failed to ensure fairness in the terms of trade.

    However, fair trade may be between the West and the Rest, including China and Bangladesh, Indonesia and Cuba, the Western workforce cannot compete with labor costing mere pennies per hour.

    The rise of China as the world's largest manufacturing nation has little to do with Chinese merchantilism, but a great deal to do with the export of Western capital and technology, something that David Ricardo specifically excluded from his account of free trade and the benefits of comparative advantage.

    But like all liberal promoters of the plutocratic interest, you ignore that and come up with some piffling argument about anti-competitive practices in Japan and China as if there was no such collusion for mutual benefit among companies and between companies and governments in America and Europe.