Kick more voters off the rolls, and let corporations have more of an influence in who wins them—that’s ALEC’s strategy.
Democracy Defamed
As organized people’s access to democracy disappears, the formal institutions of government devolve into dysfunction.
Lawmakers are no longer listening to their constituencies but instead to the technocrats on Wall Street and the Royalist shadow government manifested in “think tanks” such as the Mackinac Center and ALEC.
The 112th session of Congress (2011–12) earned the lowest approval rating ever. It was the least productive since the 80th “Do-Nothing” Congress (1947–48). Filibustering and obstruction in the Senate reached unprecedented levels.
It’s not a coincidence that this was the first Congress elected post-Citizens United.
All that money that the Supreme Court allowed Royalists to spend elected one of the most corporate-friendly House of Representatives since the Gilded Age.
The members of Congress they owned went to work on Capitol Hill in the 2011 session fiercely defending the interests of America’s superrich, protecting everything from the Bush tax cuts, to taxpayer subsidies for transnational oil corporations, to bonuses and malfeasance on Wall Street.
An early warning came from Standard & Poor’s, when they noted that the effectiveness of Congress is in question.
“The downgrade”—referring to the credit downgrade of the United States from AAA to AA+—the report states, “reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.”
Yes, America still looks like a democracy. One in which we still vote (or about half of all registered people do), we have big election-night specials on major news networks. We all embrace the idea of American democracy at work. But deep down it’s been rotted by greed and corruption.
On average, a member of the House of Representatives must raise $5,000 a week for his or her campaign. That means that every morning, Monday through Friday, they must wake up not thinking about governing but about fund-raising—how to scrounge up a thousand bucks that day. In the Senate it’s even worse, at an average of $14,000 a week.152
And those numbers were compiled by PBS before the Citizens United decision—today’s numbers are significantly higher.
No other developed nation in the world ties its democracy to endless fund-raising and unlimited corporate spending like we do in the United States.
Each year, total election spending increases. Curiously, spending on lobbying Congress went down in 2011 for the first time in a decade.153 One reason could be the recession. But more likely, spending on lobbying is down because, since Citizens United, Royalists can now invest in whichever politician they want before an election, so their guy is already bought and paid for by the time he is sworn into office—no need to lobby later.
It’s no wonder that the American people have played into the hands of the Royalists and, as a result, have very little trust in government. After all, there is no reason why they should, because democratic government, as we once knew it, no longer exists—the Royalists stole it.
Now the Royalist Masters of the Universe reign.
In just over three decades, the Royalists have crept into power, destroyed the fundamentals that supported a strong middle class, allowed Wall Street and corporate psychopaths to devour working people and transform the economy into a massive get-rich-quick scheme, and nearly crashed everything, only to rise again and promise to do the same thing all over again.
And this time, the Masters of the Universe are completely unresponsive to any democratic controls. They want to see this drastic transformation of America to its bitter, feudal end.
This development brings us to the final stage of this crisis.
Cancer Stage
A Great Crash is a painful event, often too terrible for its citizens even to contemplate.
History tells us that when the foundations collapse, and a society’s cultural core is hollowed out and the “madness” takes hold, its members will pretend all is well. Life seems to go on as average citizens try to get by, while the very rich, who understand what’s happening, consolidate their power and wealth before the final crash.
This is the cancer stage of capitalism—the point at which the Royalists have fully contaminated the body economic and politic, making the crash inevitable.
This is where we are today.
One of the foremost chroniclers of the rise of these Royalists and the consequences they bring is journalist and author Chris Hedges. He described how he views this current cancer stage in America.
“We have powerful corporate interests that have commodified everything,” he told me, including human labor, which means, according to Hedges, “human beings no longer have any intrinsic value in the ethics of corporations.”
He added, “They are commodities to exploit until exhaustion or collapse. The same is true of the natural world—we exploit the natural world until exhaustion or collapse.”
In the next section, we’ll see exactly what collapse looks like.
PART 4
The Great Crash
Chapter 11
This Is the End
I think historians when they look at this time, they’re going to wonder why the wealthy overplayed their hand like this. Why would they, when they had it so good? They had the middle class voting for the politicians that the wealthy bought, everything was running just fine, they were posting profits of a billion a year, but that wasn’t enough for them. What they did was started to ruin the lives of the very people who voted for their politicians and supported them all these years, the middle class.
Michael Moore, October 2011
If you want to know which way the wind is blowing, keep an eye on the billionaires.
So what are the billionaires telling us just ahead of the Crash of 2016?
Well, in 2012, four years before the Crash of 2016, Moody’s Investors Service noted something peculiar. It noticed American companies are hoarding record amounts of cash.
For example, in 2012 Apple was discovered to be sitting on $137 billion worth of cash. Investors actually sued the company to make it pass some of that wealth down to shareholders.
But what Apple was doing was comparatively minor. Altogether, US companies stashed away $1.45 trillion in cash in 2012, a 10 percent increase from 2011.
They aren’t investing it, they aren’t expanding their businesses with it, they aren’t hiring more workers. They’re just sitting on it. They aren’t even paying taxes on it, since, as Moody’s discovered, 68 percent of all that cash is stashed overseas.
Wall Street is also hoarding enormous amounts of money. Dan Froomkin at the Huffington Post explained in July 2012, “The latest report from the Federal Reserve shows that big banks’ cash reserves peaked in the third quarter of 2011, but are still near their all-time high at just under $1.6 trillion—an astonishing 80 times the $20 billion they held in reserve in 2007.”154
But it’s not just in the United States; it’s all around the world.
The Wall Street Journal wrote on Europe’s banks holding cash at the end of 2012: “A dozen of Europe’s largest banks reported holding a total of $1.43 trillion of cash on deposit at various central banks.”
It adds, “That represents at least the sixth consecutive quarter that the banks have increased their overall central-bank deposits. Since the end of 2010, the banks have boosted the amount they are stockpiling at central banks by 84%.”155
The Institute of International Finance, a Washington-based organization, calculated that companies in the United States, United Kingdom, Eurozone, and Japan were sitting on nearly $8 trillion worth of cash.156
Altogether, the wealthiest people on the planet have as much as $32 trillion stashed away in overseas financial inst
itutions, according to a study by the Tax Justice Center in 2012.
All of this is taking place just as the stock market was reaching historic new levels, and profits in corporate America reached the highest levels as a percent-of-GDP ever recorded. Yet, in early 2013, Money News reported that “a handful of billionaires are quietly dumping their American stocks,” including Warren Buffett, John Paulson, and George Soros.
Senator Elizabeth Warren spoke about another Wall Street quirk during a 2013 Senate Banking Committee meeting.
She noted that while most major corporations trade well above book value, all the large banks are actually being traded well below book value. She concluded there are two possible explanations for this.
“One,” she said, “because nobody believes that the banks’ books are honest.” In other words, the banks are actually still teetering on the edge, and the banks themselves know it.
“Or the second,” she added, “nobody believes that the banks are really manageable. They are too complex for their own institutions or the regulators to manage them.”157
If the economy really is doing so well, then why are the wealthy giving signs of the opposite, quietly leaving markets and just sitting on the sidelines?
The answer is they know what’s coming. They know 2008 was just the precursor, and 2016 will be the real catastrophe.
The billionaires are preparing for a series of economic shocks on the horizon, probably beginning in Europe and spreading across the planet, eventually toppling the United States.
Germany Finally Wins World War II
After the 2007–08 global financial panic, the three main monetary institutions of Europe: the European Central Bank, the European Commission, and the International Monetary Fund—together known as the “Troika”—imposed a strict austerity regime on debt-saddled nations such as Greece, Ireland, Spain, and Portugal, nations that suddenly found themselves in a fiscal crisis and yet had no control over their own money supplies thanks to the structural flaws of the Eurozone.
This austerity has produced devastating effects.
Since the Troika’s takeover of Greece began in 2009, a quarter of all Greek businesses have closed their doors, half of all small businesses can’t meet their payroll, nearly half of all young workers under twenty-five are unemployed, the total unemployment rate is around 20 percent, suicide rates have shot up 40 percent, radical political parties gain traction, and the streets of Athens are routinely set on fire in violent riots.158
This is what the Crash of 2016, in its early stages, looks like.
Driving the Troika’s austerity agenda is Germany, one of the few nations in Europe that found itself on the other side of the financial panic and not in a debt crisis.
That’s because Germany acted like America did after World War II (and even outdid us). They built up an enormous manufacturing base, shielded it from low-wage nations, and nurtured a strong middle class with labor protections and a social safety net guaranteeing health care as a basic human right.
They became an export machine. In 2011, they held the second largest trade surplus in the world, over $200 billion (the United States was in debt $800 billion). And they turned into Europe’s primary manufacturing plant, supplying most of the European continent with its goods.
While Germany boasted one of the largest trade surpluses in the world, other European nations were driven into trade deficits. The United Kingdom, France, Spain, Italy, Greece, and Portugal all have some of the largest trade deficits in the world.
Greece’s trade deficit with Germany is startling. In 2009, Greece sold 1.8 billion euros of exports to Germany. But that same year, it bought 6.7 billion euros of imports from Germany.
What all of this meant is that wealth was flying out of indebted European nations such as Greece, Italy, and Spain and accumulating in German banks. And those German banks, flush with cash, became epicenters of lending throughout Europe, since they were able to offer better interest rates than most other nations.
This export machine makes up 40 percent of the German economy today, and has catapulted them to the fourth largest economy in the world in terms of nominal dollars, despite having a significantly smaller population than the top three nations of Japan, China, and the United States.
So, when the financial panic blew a hole in their economy, the Germans were able to recover quickly. Their enormous manufacturing base immediately went to work recouping lost wealth. In 2012, unemployment dropped to just three million people, the lowest level in twenty years.
Meanwhile their bankers and Economic Royalists went to work recouping the rest.
As the biggest economy in Europe, and with the most cash on hand to help ailing nations, Germany has been driving the Troika’s agenda across Europe. It helps, too, that the European Central Bank is headquartered in Frankfurt.
The people of Germany may have kept their own Economic Royalists shackled and incapable of feasting on the middle class the way they’ve done in the United States.* Meanwhile, the German people have quietly endorsed the pillaging of fellow European nations through austerity.
Germany could have endorsed a plan to have the European Central Bank print more euros, and fund stimulus programs in indebted nations to put people in Greece and Spain back to work growing their respective economies (similar to what FDR did in the 1930s and what Germany did domestically after the 2007–08 financial panic).
But instead, German bankers exploited the debt crisis to turn the rest of Europe into indebted slaves. They funneled hundreds of billions of dollars in loans through bailout programs across Europe to ensure that foreign depositors (many of whom were Germans) are repaid by debtor nations. And in return for those bailouts, Germany demanded that Greece, Spain, Portugal, and Ireland carry out painful spending cuts that crippled working people in those nations who were employed by or relied on the government.
Despite the intended purpose of austerity, research from the United Kingdom’s National Institute of Economic and Social Research found, in October 2012, that debt-to-GDP ratios increased significantly higher and faster under austerity than if no austerity had been imposed at all.159
But reducing the debt-to-GDP ratios was never the intent of the Royalists allied with Germany and the technocrats at the Troika. Instead, their goal was to harvest Europe in the same way Bain Capital would have done to an American business. Bulldoze the economy and working class, sell off the commons, and then prime Greece to be sold off to foreign investors (many of them German) at fire-sale prices.
With the entire continent still racked by economic turmoil five years into the austerity era, Germany has profited immensely.
Since it is the only stable economy left, investors actually pay Germany to take a loan from them. In 2012, Germany was paying a 0.01 percent interest rate on about $5 billion worth of debt. As Der Spiegel notes, “Amid the ongoing euro crisis, Germany is one of the few borrowers that are still regarded as a safe haven. Many investors would rather lend the government money at bargain-basement rates than risk losses.”160
Der Spiegel goes on to say, “It has become a rule of the euro crisis: While a number of Eurozone countries suffer, Germany profits. The crisis may slow economic growth in Germany, but there are also a raft of crisis-related mechanisms that help the country profit at the expense of other nations.”
As of 2013, Germany has spent or committed to spend nearly $400 billion on these “crisis-related mechanisms” aimed at saving the Eurozone in a way that ensures German dominance over the continent on a scale not seen since Hitler toppled Paris.
George Soros criticized the German response to the euro crisis, saying, “Germany did the minimum that was necessary to preserve the euro but no more! And that is what maintained the crisis conditions which are now four years old.”161
He remarked on what Europe looks like now under German financial rule, “I am afraid Europe is in an existential crisis. The debtor countries are subordinate to the dictates of the creditor countries and have eff
ectively been relegated to second-class memberships.”162
In fact, in January 2012, when it looked like Greece might reject a bailout and leave the euro, Germany proposed ousting the democratically elected government of Greece and installing a European commissioner (think Detroit financial manager) with the power to rewrite the national budget and make sure that Greece takes its medicine prescribed by Germany.
Economist Richard Wolff remarked to me on the Greece situation, in which Royalists are squeezing whatever they can out of the population, “The irony is, when you look back at the history of empires, it has been that narrowness, that failure to look at the long-term, that absorbed self-interest, that has been the final end of those empires.”163
Germany Goes Too Far
The question asked in 2013 in Europe was just how far were Germany and the Troika willing to go? Not only how much more money are they willing to spend keeping the Eurozone intact but just how ruthless will they be in their continuing demands for austerity as governments in Greece and Spain unwind into austerity death spirals, thus deepening the debt crisis?
After all, if Germany destroys Europe’s economy, won’t they destroy their own consumer base?
Not necessarily. Based on the way they’re structuring their trade relations, Germany is able to see the Eurozone out to its bitter end.
Like the Economic Royalists in America who’ve sold out the middle class to capture emerging markets in the developing world, the Germans are preparing for a post-Europe export economy.
As the BBC reported in late 2012, “German businesses are becoming less and less reliant on selling to Eurozone countries and are becoming more and more successful in selling to China and the leading emerging markets.”164
Since 2000, Germany’s trade to European partners has dropped significantly from over 45 percent to 38 percent in 2012, and it is projected to be 34 percent by 2020.
The Crash of 2016 Page 19
