Ilargi: Shadow Boxing and Bogus Crisis Triumphalism

By Raúl Ilargi Meijer, editor-in-chief of The Automatic Earth. Originally published at Automatic Earth

In yesterday’s State of the Union, Obama said The ‘Shadow Of Crisis Has Passed’, and the one and the only thing I thought was: ‘Good, so now we can tackle the crisis itself?!’. If speeches like the SOTU last night, and the reactions to it, make anything clear, it’s that the PR guys won the fight against critical thinking. Sure, there are people for whom that shadow has passed, but a president is supposed to be there for all Americans, not just for those who finance his campaigns and those of his successors.

And for most Americans, the shadow hasn’t passed at all, and the crisis certainly hasn’t. And hollow promises to help the middle class are not going to change anything about that. It’s an elite game, and all others are left to fend for themselves. For now that remains hidden behind the veil of over 50% of Americans receiving some kind of government benefit, but that won’t last. We may have some idea of how much richer the rich are getting, and even that is a stretch, but we have much less idea of how much the poor got poorer.

And the President, of all Americans, won’t tell us, he’d rather hail his ‘achievements’ as prepared and blown out of all proportions by his spin team. His political ‘adversaries’, who play their role of ‘hating’ him only halfway convincingly, won’t call him on the spin, because they have nothing to gain from trying to blow up the newfangled American Dream.

Their message looking forward to the 2016 elections is that they would do even better, but that doesn’t sound credible with the 5% GDP growth and 5.2% unemployment numbers the White House pulls out of its top hat. They’re just as dependent on spin as Obama is, and he trumped them on it. What are they going to do? Promise 10% GDP growth?

The GOP will look to drastically cut those benefits, and they know full well that that would cut growth numbers, not raise them. 5% growth is already so far out of left field that Obama’s spin doctors have the other side cornered on US economy. They have on international politics, too.

The White House’s ludicrous stance on Russia’s involvement in Ukraine, ludicrous because none of its accusations have ever been proven over an entire year, and the sanctions that were instated because of the hollow accusations, are a hard act to follow even for John McCain and his dementing octogenarian rabble rousers who crave nothing more than for that final grand scale deadly battle in their lifetime. Can we make in nuclear plese? After them the flood.

All they could do to better Obama from here is send in American boots on the ground in the Donbass, and they know that would be the least popular decision in many decades. But domestically, economically, and internationally, it’s back to the drawing board for the Grand Old Elephants all the time, they’re always a step behind. Must be frustrating. The Obama people have played them as much as they have played the American people.

Who, as should be obvious by now, have nothing to expect from either side, since both owe allegiance not to the flag or the Founding Fathers, but to the rich getting richer who fund them, without whom they’d have to give up their power plays and -dreams. Something a certain kind of people will resist at any price. The kind that floats to the top of this kind of cesspool.

Allow money into politics and the former will end up owning the latter, no exceptions. Money won’t support candidates with a conscience, only those who’ll do anything to advance their careers, who are as pliable as and spineless as a stick of wet gum, and those are all that will be left. If anything typifies American politics, it’s moral bankruptcy. One dollar one vote. 100 million dollars, 100 million votes. And then they insist on calling that democracy, a concept promoted by the media purchased the same way the politicians are.

All you need to do is get people to believe whatever it is you got for sale. And 99.9% of people are easily fooled. That’s how you define democracy in 2015: how many people can you fool? Which is the most convincing sleight of hand?

The Europeans are well down that same road. Mario Draghi is set to announce over $1 trillion in QE tomorrow, and none of it will ever reach the alleged target, the real economy. He set up his QE in a ‘proportional’ way, meaning most of that trillion will go to Germany and France, not the Greeks and Italians who need it most.

Draghi will buy government bonds, but that doesn’t help Europe’s businesses. And not just because they are far more dependent on bank loans than American companies are, who issue more bonds, but because demand, and spending, is way down. That’s what it means that Europe is in deflation. It’s not falling prices, it’s that people don’t spend, and they certainly don’t borrow.

Draghi is engaging in the classic central banker’s ‘pushing on a string’, and Goldman’s former banker and present day acolyte knows it. He’s created a situation in which another $1 trillion looks acceptable, necessary even, to the majority of the eurozone politicians. Who mostly are clueless about the effects of such expenditures. But who look at the US and think it must have worked over there; who fall for Obama’s spin doctor narratives as much as the America people do.

Draghi’s $1 trillion has long been priced in, it won’t do anything for EU economies but gut them even further, and it may be completely irrelevant as soon as this Sunday when Greece may well elect a government that has vouched to blow up the deals the Troika made with the technocrats the EU itself installed in Athens.

Not a pretty picture, is it, either in Washington or in Brussels?! Well, I can guarantee you it’ll get a lot worse before it gets any better. We’ve let the clowns come too far. Way too far.

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  1. Carol Sterritt

    My husband found this on the web, over at the author’s own website? Anyway we have spent some of the day discussing how very brilliant it is. And I was pleased to see that Yves was mentioned and praised in the article.

  2. Gerard Pierce

    Many of us have been aware of these things for quite a while, but Meijer has a very effective way of stating what we do know. The only thing missing is where we go to find the torches and pitchforks.

    1. V. Arnold

      @ Gerard Pierce
      The only thing missing is where we go to find the torches and pitchforks.
      Why, the streets, of course…

  3. Clive

    What a lot of economists seem to have forgotten (or ignored) is the serial offender mercantilists have a long, long history of deflation (such as Germany and Japan who spent much of the 1980s in either borderline or outright deflation) and — here I want to put this in bold capitals but readers don’t need to be shouted at — this is a feature not a bug.

    The very second that internal domestic demand might get to be anything other than anaemic (i.e. “consumers” which actually means the real bulk of the people in a country get to keep a larger share of the value which is collectively produced in that country), then the wheels come off the mercantilist trolley (the less of that domestic production gets to be exported and/or the more imports are also required to satisfy the newly-increased domestic demand).

    And after a relatively few decades, the policy’s consequences become structurally embedded (e.g. in Germany where there is comparatively little ownership of residential real estate because there’s not much chance of significant asset price increases or Japan where three generation mortgages were not uncommon before the bubble era — a three generation mortgage absolutely depends on miniscule interest rates because otherwise interest becomes far, far more significant cost than capital repayment). This means there’s a lot of self-reinforcement of the policy of mercantilism.

    So for anyone who thinks that the ECB (which means in practice anyone who thinks that Germany) is about to call time on its tried-and-trusted approach to international trade and how it manages its economy is deluded. If for no other reason that the vast majority of Germans sincerely believe the Germany’s “success” in its export strength is down to the “hard work” of its population and general all round Germanic cleverness — and that’s before you get to any multi-generational assumptions which have been embedded because this is the policy which Germany has pursued for ages.

    In reality of course, the last thing German wants is a resurgent periphery turning themselves into export powerhouses. As Ilargi rightly says, most of the QE will go to benefit (still further, if that were possible) German businesses. Germany doesn’t give a toss about deflation.

    1. James Levy

      Excellent observation. The interesting thing is that US merchantilist policies in the 19th century were buoyed by its spectacularly large domestic market, which allowed for increased internal consumption and (after 1880) robust exports of manufactured goods. As is so often the case the US has become the textbook example of things when in fact it is always an outlier because of its size, population, and natural resource base. We often forget that although Britain was a much greater manufacturing nation in 1860 than the US, the US already had a significantly larger population (35 million to 28 million).

    2. Jim Haygood

      ‘The last thing German[y] wants is a resurgent periphery turning themselves into export powerhouses.’

      On the hierarchy of existential risks faced by Germany, this one ranks just above ‘asteroid hit destroys earth.’

      1. James Levy

        I’m sure people looking at China in the year Mao died or Japan the year the A-bombs were dropped would have said the same thing: what kind of competition can be expect from that hopeless economic wreck? Or do you imagine the Germans are racially superior to those swarthy dopes in the periphery?

  4. financial matters

    Well said.

    Polanyi has a chapter in “The Great Transformation”, ‘The Self-Regulating Market and the Fictitious Commodities: Labor, Land, and Money’.

    His point was that when market forces became the dominant way of organizing society it needed the fiction that these 3 elements could be treated as commodities, in other words available for sale at a price dependent on supply and demand.

    ‘land is nature, labor is the technical term given to human beings, and money comes into being through the mechanism of banking or state finance. None of them is produced for sale. The commodity description of labor, land, and money is entirely fictitious’

    ‘To allow the market mechanism to be the sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power would result in the demolition of society.”

    1. JerseyJeffersonian

      And so it has proven to be. Just look around you at the vast waste of our Kulchur. Fobbing off “externalities” upon the Earth, the impoverishment of humans both material and spiritual, and the worship of money as coercive force. All for the worship of the new Golden Calf of the Market.

  5. JLCG

    There is a curious confusion between middle income and middle class. The middle class was a type of consciousness. A man earned a wage or salary and was married to a woman that raised their children and took care of the quality of domestic life. At times a problem regarding income arose and then the mother dropped from her level of middle class to that of servile employment and sustained the family until the husband again was able to keep the family afloat.
    Nowadays it is inconceivable that such social arrangement would be recreated. Women have now come to occupy many positions in the servile class. What is after all to be receptionist for a psychologist?
    What is called now saving the middle class is merely an effort to increase the income of certain people not to have a true middle class whose values have been drowned by the consumerist economy.

      1. hunkerdown

        It’s intentionally vague, being a tribal identity and all. Someone here wrote a while back on the Western ideal of every man his own slave and every man his own master. Every bourgier his own proletarian and every proletarian his own bourgier. Makes for any number of self-licking ice cream cone melodramas.

  6. Eleanor

    The US has a long history of avoiding the term ‘working class.’ Middle class is the term we use instead. It folds everyone except rich and poor into one huge group, where factory workers and doctors and middle managers all have the same values and interests.

  7. Steven

    What we appear to be setting up here is the material basis for a genuine Clash of Civilizations. Under the old form of imperialism, the West just came in and took by force the wealth of less well-armed people. The modern form of Western imperialism models itself on the U.S. Empire of Debt. The West ‘pays’ for the wealth it takes. But it pays with money that can’t really be spent because the West increasingly doesn’t produce anything ‘developing nations’ want or can’t produce for themselves less expensively. So that money has to be ‘sterilized’, i.e. removed from circulation in the real economy by being transformed into sovereign debt.

    Couple that with the West’s financial engineers working overtime to conjure up new forms of ‘toxic waste’ and exchange it for debt backed by the full faith and credit of their respective governments – apparently now mediated through the European Central Bank – and you have a global economy hurling itself towards a big smash-up.

    1. juliania

      I don’t quite know what you mean by ‘clash of civilizations’. Most of the US poor are very civilized, maybe too civil.

      1. Tsigantes

        “Most of the US poor are very civilized, maybe too civil.”

        True. To which I’d add, this applies not only to the US poor, but the majority of humankind, everywhere. Today’s problem is not lack of civilisation globally but the rather terrifying degeneration of ‘the West’s’ new so-called elites and their evident contempt for and determination to corrupt and destroy our civilised values, institutions and democracy.

        It is not semantic nitpicking to point out that the word “elite” folds under one umbrella professions, earned/elected positions and interests that should never be identical i.e.”politician”, “institutions”, “military”, “businesss leader”, “banks”, “corporations” and their attendant media, PR and advertising industries. This self-flattering brushstroke of a word implies superiority on the one hand while suggesting that today’s breakdown of demarcation lines between democratic institutions and capital is normal, between journalism and propaganda natural.

        1. hunkerdown

          Even though I’ll just observe in passing that you’re conflating “civilization” and “human development”, and “democracy” and “managerialism”, and “normal”, “natural” and “equitable”, I don’t see what’s wrong with the word “elite” here. All those professions, offices and institutions *do* have at least one common, *natural* (of its nature) interest: reproducing a subordinate working class whose production they can arrogate. It’s not self-flattering to point out that management’s concerns are separate from and often antithetical to labor’s. It *is* self-flattery (and gaslighting) to suggest that ANY institution is impartial and can bend in any direction if onwy we bewieve.

          The USA is a nation of reenactors and evangelists. One bunch of delusional partisans tries to reenact the 1870s worldwide while the other tries to reenact the 1910s worldwide. Both ought to be institutionalized.

      2. Steven

        Sorry. Your confusion is understandable. This article was really more about keeping the peace by maintaining the illusion of prosperity in the US and other Western democracies that it was about QE per se. My point was that one of the techniques used in this “shadow boxing”, QE, further erodes confidence in the money and sovereign debt to which the West increasingly resorts to pay its way in the world. Ultimately, people in the ‘developing world’ are going to realize their resources and labor are being ‘paid for’ with hot checks and decide to keep their goodies for themselves. (Wasn’t this supposed to be one of Osama’s beefs with the US – that Arab oil was being paid for with hot checks, with “debt that can’t be repaid” or at least won’t be?)

  8. MaroonBulldog

    “Bogus Crisis Triumphalism”: His song is sung in a minor key, but still he wants me to hear a song of triumph. I hear a dirge.

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