The Subsurface World of Inflation, Cannibalism and the Plight of the
In March 2006,with practically no explanation, the federal government
stopped reporting on M3, the broadest measure of the money supply in the U.S.
The most important “asset” in the 21st Century is not cash, gold,
real estate, guns or even petroleum, but Information. “Knowledge”
trumps everything. That is why, for example, the telecommunications industry
is right now in the process of buying up Congress so that it can finish
off “network neutrality” and, eventually, strangle your access to
knowledge and information on websites like this one. 
Thus, when the federal government suddenly withdraws a well-established multi-trillion
dollar measure of the economy's health, skeptical minds wonder if, yet again,
the Government's penchant for secrecy is intended to keep us ordinary citizen
types from seeing what it is up to. What the Administration is likely “up
to” is flooding the economy with billions and billions of digitally created
“cheap” dollars. The massive influx of money will juice the stock
markets, plump up the economy and, of course, create price inflation. 
Other than starting a war (or a series of small wars) 
and the huge government spending on weapons and military infrastructure that
war entails, the next-favorite capitalist means of rescuing an economy on life-support
is to increase the money supply and stoke inflation.  Sometimes,
as in the present circumstances, the situation is so desperate that a government
may feel the need to start a “perpetual war” and to massively increase
the money supply at the same time.
Big Business and the financial sector really could care less about rising prices
and the cost of living. That is why when the government reports that “core
inflation” is “tame”, it has teased out all the data relevant
to individuals who live by wages, that is, such “irrelevant” and
“volatile” data as the cost of energy, food and housing. Big business
and the financial sector could care less whether the costs of energy, food and
housing literally determine how, and whether, the majority of us live or die.
The only inflation factor that Big Business and the financial sector really
care about is Wages, that is your wages. If prices rise, but your wages,
relative to your cost of living, remain static, then “inflation”
only bites you, dude. The bite taken out of your hide translates into
someone else's profit-meal ticket. Thus, when prices rise but wages do not,
it is as though a portion of workers’ wages is being ripped off. On the
other hand, if your wages rise commensurate with the increase in the
real cost of living, then the increase in the costs of goods and services
goes back into your wages. In that circumstance, money inflation does not
give the owner class anything extra to bite into.
Not coincidentally, inflating the money supply (and consequently devaluing
the dollar) will also allow the U.S. government to stealthily default on its
own debt issues. Because of the dollar's reserve status, we pay for our imports
from countries like China, in dollars. The merchants deposit these dollars in
their countries' central banks, or exchange them for their local currency. The
central banks often turn around and purchase U.S. treasury bills and bonds.
By inflating the dollar, the U.S. government will pay back less on both
principal and interest. This is also why mortgages benefit the debtor during
inflation. Therefore, if, 1) by no longer reporting on M3, the Federal Reserve
can increase M3 by more than the previous track record of a hefty 8.22% per
year, and 2) the Administration masks the true increase in the cost of living,
thus freezing or forcing down wages, then 3) it can engineer an increase in
the profitability of corporations, and an apparent growth in the economy . .
. all at workers' expense, of course.
Why would the Treasury and the Federal Reserve Bank want to do this? The answer
is that the Collective We are in deep economic and environmental doo-doo. Somewhere
in the supercomputers at the US Treasury or Federal Reserve, they have run an
economic simulation which has analyzed the various humongous hairballs
that 21st Century human beings have coughed up: a) Global Warming (or, better
characterized as Global Weather Weirding because as the oceans warm and the
ice caps melt, various parts of the globe's weather will change in different
ways), b) overall natural resource depletion, c) pandemics caused by industrial
food production (like bird flu), d) health and environmental problems caused
by industrial pollution and foolhardy uses of mercury, pesticides, plastics,
fluoride, cell phones, etc., e) radiation exposure due to DU weapons, nuclear
armaments, nuclear power generation waste and Chernobyl-like accidents, and
f) the peaking of easy light, sweet oil production such that petroleum extraction
and refining will become progressively more energy intensive for every bit of
energy you can get out of a barrel of oil.
When the Treasury and the Federal Reserve Board (and the Pentagon, too) ran
their computer simulations, they came up with the TINA (There Is No Alternative)
answer of inflating M3 to keep the global economy chugging. This is the only
remedy that Free Enterprise/Open Market “cultists” (like those who
populate America's power centers) could accept even though, paradoxically, the
world and American economies have been totally and deliberately stage-managed
since the end of the Second World War. However, even the TINA answer of inflating
M3 is ultimately precarious, and hence the steep, steep rise in gold prices.
Gold bugs, however, are equally deceived by its luster, for gold has little
intrinsic value. Gold is mostly an anxiety index, a psychological measure of
economic insecurity. When, as now, people with “money” feel stressed
and anxious, they put their chips on precious metals. However, gold, like all
money, is also based on faith in the system and the ability to exchange the
stuff for something else of value. Faith in glittering gold often interferes
with the realistic perception that money, including gold, is just a confidence
game. The Federal Reserve's own handbook
on the money supply (which they no longer make publicly available) states:
What, then, makes these instruments -- checks, paper money, and coins --
acceptable at face value in payment of all debts and for other monetary uses?
Mainly, it is the confidence people have that they will be able to exchange
such money for other financial assets and for real goods and services whenever
they choose to do so.
We really are a faith-based world, but not in the religious sense that Mister
Bush intends it. The “faith” in the currency comes from the implicit
confidence in the societal stability that will allow future exchanges
using the currency. In as much as military might is the ultimate enforcer of
that stability, military might is the ultimate guarantor of any form of
money. Nevertheless, as we saw during the U.S. Army's slow motion meltdown
during the Vietnam War, and as the retired generals are beginning to gnaw their
knuckles about today, the stability of the military might itself depends on
the stability of the larger society and society's confidence in itself.
Thus, if the Government tries to use intimidation, force and military oppression,
at home and abroad, to maintain the “stability” of domestic and
world systems (gee whiz, has Mister Bush tried to do any of that???),
then it inevitably undermines the confidence of society in itself and in its
own institutions... which, in turn, further undermines faith in the economy
and the monetary system. As the repeated application of intimidation, force
and military oppression continue to undermine social confidence, then Leaders
usually look for other means to artificially pump up “faith”, such
as hyping religion as a metaphysical way to buttress “confidence”
in an otherwise disintegrating world. That is historically what Leaders have
always done and are doing today.
The process of disintegration can occur like water torture over many years,
or it can fail catastrophically. Which brings us right back to TINA and why
the Administration has stopped reporting on M3. By obscuring M3, the feds can
sneakily inflate the economy, and indirectly, fizz up the stock markets (the
stock markets being yet another confidence game which will reach maximum bubble
dimensions just in time for the mid-term November elections, fancy that!).
What the ownership class and its leaders will not suffer, however, is this
simple truth: the best guarantee of confidence in the stability in the economy
is simply to allow people to live well and to prevent or alleviate as much human
suffering as possible. Alas, permitting the Many to live well necessarily means
that they must have more material benefits, which, in turn, means that those
who have more material benefits now are not going to give up any part of their
stash to allow everyone else to do better. Thus, are the Powerful Ones and the
Owners hoisted on their own petards, and, once again, the resort to TINA and
the non-solution of the obliteration of data about M3.
So let us return to the stealthy inflation that is engendered by not reporting
on M3 and the accompanying petrification of wages. Unfortunately, wage earners
everywhere will bear inflation on their shoulders because wages, specifically
your wages, are, practically speaking, frozen whenever the Government pronounces
that “core inflation” is “tame”. If inflation is reported
to be “tame”, then real wages will not rise in sync with rising
real prices. When the Administration and its media lapdogs thus report that
you should be assuaged because “core inflation is tame”, they are
deliberately deceiving all the Little People of the world because all that
is really tame is your wages and your own paycheck! The profits, the difference
between the rise in prices for essential goods and services and your stagnant
wages, will fatten the large corporations and overseas debt will be reduced
with the payment of inflated, less valuable dollars. All the while your real
well-being and security will become progressively more tenuous. Of course, this
undermines societal confidence and erodes faith in the economy and in money.
And so the economic death spiral continues.
Once an economy has “matured” (as it has in the United States)
and once there is no more free lunch like that afforded by cheap and abundant
hydrocarbon fuels, then capitalism (which is great for producing consumer goods
and advancing “technology”, but hardly worth anything for improving
the overall lot and well-being of the masses) reverts back to what it really
is: an economic form of cannibalism. Capitalism either eats surplus Labor or,
if surplus energy is available, it consumes energy. When there ain't no more
surplus energy to consume, then Labor has to eat less so that Owners can continue
to eat more; and when the “food” runs out, Owners will start to
eat Labor alive. Ultimately, in truly straitened times, the Owners end up eating
one another. That's why, when the economy starts to splutter, capitalists, resolutely
united against the rest of us, still eyeball one another as a victim to devour.
It's that economic Donner Family Bar-B-Que that the Administration is desperately
trying to forestall by surreptitiously shooting up digital growth hormones into
the economy's sclerotic arteries.
Real income for working people has actually been trending downward over the
years. In inflation-adjusted terms, on average, working men and women are actually
making less money than in the 1970's and our quality of life is going down.
The demise of union pension funds, the under-funding of public schools, the
deterioration of public health programs, the curtailment of library hours and
the cutting of worker salaries all contribute to the general decay in the standard
of living. What we need to appreciate is how the economic and financial shenanigans
of the Administration, such as its recent elimination of reporting on M3 data,
are deliberate steps toward unraveling the, albeit minimal, progress made since
WWII by the Northern Hemisphere's middle and working classes, all in the cause
of preserving profit for the ownership class.
So here's the bottom line. Capitalism's “Profit” has to
come from somewhere. During the last century or so, it largely came from the
extraordinary energy that could be derived from the easy extraction and refinement
of cheap and readily available hydrocarbon fuels. Meanwhile, the environment
and the world's climate are undergoing a meltdown. Just as petroleum is becoming
less available, less easy to extract and more costly to refine, the environment
is turning to dog poop and the weather is becoming ever more weird, all interfering
with the pursuit of PROFIT. As profit gets squeezed in its traditional venues,
Capitalism demands that profit come from somewhere, namely by squeezing it out
of something... or getting that profitable pound of flesh from someone else.
The Administration has nominated all of us as the “Squeezees”.
In the Administration's mind, dismantling all of the remaining social services
and safety nets, and gradually reducing the majority of us to medieval peonage
(and, eventually, human hamburger), is a noble and necessary suicide mission
to rescue capitalism. It won't work in the long run, of course, but meanwhile
we've all been volunteered for the mission.
1) M3 is the aggregate of M0, M1 and M2, the total money supply,
plus the total of all commercial and industrial loans that are financed by large
denomination Certificates of Deposit and Eurodollars (essentially, the amount
of dollars held outside of the control of the Federal Reserve, in European banks,
or other central banks.). M0 is the total of all physical money; M1 is M0 plus
the amount of money in checking and bank demand accounts; M2 is the total of
M0 + M1 plus savings accounts, money market accounts and CD up to $100K. M3
includes such mysterious accounts as those huge and possibly unstable hedge
funds and derivatives that the major money institutions use to try to spread
the risk of their clients' low quality and highly speculative investments. M3
may total more than 3-4 trillion dollars in excess of M2. Obviously, M3 dwarfs
the actual amount of physical dollar bills and coins that are in circulation.
2) The Electronic Frontier Foundation's
website is a good place to learn about this issue. The problem starts with
some major ISPs and the back-bone telecommunication companies trying to implement
a “fee” for sending email, and will graduate to charging different
rates for “prioritizing” the delivery of your email and creating
a tiered system for the delivery of web content based on ability to pay. In
short, your “friends” in Congress and in the telecommunications
industry, even as you read this, are colluding and working on legislation to
strangle the Internet and curtail your access to alternative information websites
like this one.
3) Money is created all the time by the Federal Reserve Board
and by the banks. A loan creates money, as does the sale of government bonds
as do numerous other complicated financial instruments created in years past
to expand and protect “money” without public scrutiny or control.
4) The never-ending “War on Terror” of the post
9.11 era, like the 50 year “Cold War”, is intended by Republicans
and Democrats alike to create a permanent “war economy” that creates
“wealth”, keeps capitalism sputtering along and maintains the status
quo domestically and world-wide. The fact that a lot of people die in the process
of preserving economic interests is viewed by technocrats and the political
sociopaths who pass for “leaders” as just so much “collateral
damage.” In the geopolitical and economic chessboard, the pawns -- like
in Vietnam, Serbia, Haiti, Rwanda, Chile, Iran, Iraq and the NYC Twin Towers
-- are always sacrificed for the “good” of the game and the preservation
of the capital playing pieces.
5) Inflation is created by monetary policy. It is the cause
of, not the effect of an increase in “prices” or wages.
6) This is why all those deepwater wells, heavy oil and Canadian
shale oil deposits won't relieve rising hydrocarbon prices. The energy return
on the phenomenal investment necessary to extract and process these deposits
will be passed on in the form of phenomenal increases in prices.
Zbignew Zingh can be reached at: Zbig@ersarts.com.
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