Making Money and Losing It

Ever wonder why you just can’t “get ahead”? Well, it’s all part of the larger scheme of things. Oh, I know, some folks do get ahead in one way or another and to one extent or another. But only the very few – the less than one percent – really make money and keep it or even accumulate enough wealth to leave a sizable inheritance to their children. The number of Americans literally living from hand to mouth has grown astoundingly high, especially since the ascendancy of the new financial elites with the deregulation of financial markets. To understand it all we have to step outside of our ordinary ways of thinking about money, value, and our lives.

In a moral economy, things would be different. But that’s not where we live. Our economic system has devolved from open competition of individual entrepreneurs in wide open environments, to a closed system of centralized economic growth in denial of limits. The perpetual-growth economy is controlled by giant investment banks and hedge funds and runs on debt-based money. That means money is created by debt itself.

On first thought that doesn’t make much sense; money is supposed to represent value, not debt. But that is not how it has been set up ever since the private central banks were given control, indeed ownership, of the creation of money. Instead, money is a product of the strange relationship between the nation and its private bankers. The Federal Reserve System was established as the “lender of last resort.” in 1913. This was meant in part to respond to fiscal crises such as the financial panic of 1907. The other part was a quiet takeover of the money system by the big private investment banks.

Making Money by Indebting a Nation
Some argue that the creation of the Fed as an independent agency was in fact a takeover of the function of a national central bank by the private bankers of the time. That view has significant historical validity. Though chartered by the U.S. Congress, the Federal Reserve System consists of twelve tax-exempt regional Federal Reserve Banks organized and operated as private corporations. Most importantly, the Fed was given control over the creation and lending of money.

Absurd as it sounds – and ever so costly –the national currency is not created by the Treasury. The Treasury only acts as a printing shop for the Fed. In effect, the Fed is a private banking cartel that lends to the government and to member banks the money it creates by generating public debt. So, to conduct its operations, the government has to “borrow” money from the Fed, which sells Federal Notes and Bonds to represent that debt. The U.S. Treasury can only offset that debt by collection of income taxes and other revenue. A lot of technicalities in this process obscure the basic fact that the right of the nation to produce its own money was high jacked by the biggest banks – “members” of the Fed – back in 1913. That has cost us all dearly ever since.

The Federal Reserve issues Federal Reserve Notes and Bonds. These draw interest for the buyer and charge the government, in whose name the Fed issues these debt instruments. So, the money the government ‘spends’ is owed to those institutions which ‘buy’ from the Fed the bonds and notes that signify the debt. One might say that the Fed is a “free rider” middleman. This process indebts the government – that is, the people – for all the currency, whether paper or electronic, that the Fed issues as part of its monetary policy.

Perpetuating Public and Personal Debt for Fun and Profit
The government becomes indebted in its turn to the ‘creditor’ institution or nation that bought the bond, for its face value plus any interest that accrues over time. The Fed is owned by its member private Big Banks, which have a sweet deal we’d all love to get a piece of but never will. The Fed issues credit to the Big Banks, say a billion dollars, and the Big Banks in turn loan out many multiples of the billions it ‘borrows’ from the Fed. Since the crash of 2008, the deal has been especially sweet, since the Fed charges a near zero interest rate. The Big Banks get to charge market rates for multiples of the funds borrowed for next to nothing. Huge profits beget huge bonuses for bank executives, not to reward some kind of executive performance, but for their just ‘being there.’

We should all be so lucky. But we are not. The average person, small business, or even not-so-well connected corporation has to borrow from the institutions run by the financial elite – the Big Banks – in order to initiate a major project of whatever kind. That borrowing had to be paid back with interest, so that whatever is done with the money has to “earn” more money than was borrowed in order to pay back the loan. That is often not easy. Just paying a mortgage seems to take forever. Even at a “reasonable” interest rate for a thirty year mortgage, most folks “pay back” more than double what we originally borrowed.

But in any case, what most people don’t understand is that the result of all this is that more money is always owed than is “out there.” If every loan requires repayment plus interest, where does the interest come from? Well, from “profit” or from wages, if the borrower is lucky. But that profit or wage comes from money already in circulation; that money in circulation was also created as debt. So, the only way for all money owed to be paid back is for more debt to be created, releasing more dollars into the money supply, paying off prior debt.

Reaching the End Game
Sound like a Ponzy scheme? If it does, that means you are paying attention. It is essentially no different than a Ponzy scheme. The whole house of cards stands on a perpetual expansion of debt that enables previous debt to be paid and the system to continue. That is only one of the reasons why the debt based economics of endless growth cannot ultimately be sustained. Debt cannot be expanded indefinitely.

There is another reason the debt-based growth economy cannot continue indefinitely. As with any exponential scheme of expansion, the limits of its environment eventually constrain it from continuing. That is where we are today with reference to “capitalism as we know it” and the material limits of the planet earth.

If you know anything about population growth, you recognize that a seemingly small percentage rate of growth after a few generations results in a very large number of people. From our current world population of around seven billion, growing at a moderate rate, we will soon have a population that by anyone’s measure cannot be sustained on one planet. One additional fact is important. A relatively small proportion of world population participates in the industrial growth economy but everyone else – of course – wants to. That is why more and more people everywhere find it increasingly difficult to “get ahead.” The game is almost over; it has reached its limits. Current world financial instabilities are symptoms. Economies with social purpose must replace mindless growth for the purpose of concentrating wealth in fewer and fewer hands.

Another way is possible and necessary. Money is inherently a public good. It is an inherent right of the nation itself to maintain sovereignty over its monetary system. The central banking system should be nationalized and subjected to public policy rather than be driven by private profit for financial elites in opposition to the public interest. Then, money could be based on credit, properly invested in the public interest, and thereby eliminate most of the false public debt it has caused by having been privatized.

Capitalist Culture and the American Worker

We are a Capitalist Culture. The entire course of the industrial era has been driven by capital investment in technologies and materials that together have increased economic production. In the U.S. – contrary to corporate folklore – much of that capital investment has been made by the government, often at the behest of business. Infrastructure was the primary focus. The federally funded railways were a major factor in the expansion of the West. The Interstate Highway System started by President Eisenhower, virtually guaranteed post-WWII economic growth and indirectly subsidized the boom in the automobile industry. The early years of NASA saw major new technological inventions and aerospace accomplishments by a government-funded mission-driven enterprise. Advances in the aviation industry, largely publicly regulated then, benefited greatly from those developments. Numerous aerospace corporations grew rich on government “cost-plus” contracts, all the while praising “free market capitalism” and “free enterprise.”

The allies had won World War II supported by U.S. government investment in rapid invention and deployment of new (mostly military) products, also generating full employment. The war economy produced many jobs after politically powerful capitalists forced unemployment-inducing cutbacks in the initially successful New Deal. Investment in productive assets is the driving force behind all economic development. Government investment of public capital – paid for by our taxes – has driven much of the growth of the U.S. economy. U.S. business has been a prime beneficiary of public investments over the nation’s entire history.

Corporate Capital and American Culture
Americans have come to believe that economic development has resulted only from the combination of private capital and personal invention. It is an unquestioned cultural assumption. Why? Because Big Corporate Capital now controls most cultural communication in the U.S.A. The interests of the biggest corporations dominate the content communicated in the mass media — also controlled by Big Corporate Capital. Corporate ideology is expressed in a variety of ways by twisting the ideas that would normally express core American values. The mass media implicitly support corporate agendas rather than the public interest, while sounding like they defend core American values.

A classic case of corporate capitalist culture distorting cultural values were the efforts of groups like the John Birch Society in the 1950s. Like the Birch Society, today’s Koch brothers’ front groups work to get “right to work” laws passed in most states. Who would not agree that everyone has a right to work? It is virtually a universal cultural value, closely tied to “American individualism.” However, the “right” of one person to work in a particular unionized factory or office – without joining the union or paying union dues – is not quite the same thing.

When a union negotiates with management for a living wage or safe working conditions, all wage workers in that business benefit from that negotiation. For a worker to have the “right” to not pay union dues or a fee for the cost of the negotiations that benefit him, that worker becomes a “free rider.” He or she benefits from the success of the group but refuses to pay his/her share of the costs of that benefit. Any one worker has a “right” to not contribute to the efforts of a united group of workers to achieve a living wage. But in that case, s/he should not expect to reap the rewards of that effort. Such blatant exploitation of the efforts of others is the height of hypocrisy. It is also a direct attack on the rights of all other workers to effectively bargain for reasonable wages.

Sure, one could point to some cases where a union has gained unjustified power. Unions, like any other organization, when they grow too big and powerful, tend to act in the bureaucratic interest, not in members’ interests. The teamsters under the ‘union boss’ Jimmy Hoffa come to mind as such as case . A man like Hoffa was rather similar to the likes of a Jamie Diamond or the CEOs of several other financial corporations today, who have ruthlessly exploited their positions as heads of their institutions. The main difference is that nobody had qualms about prosecuting corrupt union leaders. However, corrupt “Banksters” today seem immune to all but the mildest disparagement, no less jail time. Instead, we hear “nobody could have predicted the financial crisis,” when many non-corporate economists did just that as well as point out the corrupt nature of the behavior of the financial elite.

American Values: Minimum Wage and a Living Wage
Recent surveys make clear the American public’s view that workers should be paid at least enough to subsist – it is called a “living wage.” If you work full time, you ought to be able to pay rent and buy food, clothing, and shelter, the basics. Yet over the past several decades more and more jobs are at or near, even below in some cases, the woefully inadequate “minimum wage.” The power of corporations over the political culture coincided with the corporate takeover of the congress and many state legislatures. Wage theft is rampant in situations such as the fast food industry where workers’ power to defend themselves against abuse is at or near zero. That, of course, is where wages are extremely low and the supply of workers is much greater than the demand.

The pure apologists for capitalist culture even argue that there should be no minimum wage, so that the magical “invisible hand” of a “free market” in labor can find the “true value” of any particular job. In a civilized society, one would think, no job should be valued at less than is needed for survival. Yet many executives who have the opportunity to do so, pay starvation wages. I know small business owners who insist on paying their workers a living wage, even for unskilled jobs, when they could pay only minimum wages. But these are entrepreneurs who have consciences; they believe in the American values of fairness and mutual loyalty of employer and employee.

One retired business owner told me with great confidence that raising the minimum wage would be counter productive for low wage workers. They would simply have to spend extra on more expensive fast food because their higher wages would drive up prices. Others claim that raising the minimum wage would destroy their businesses, because their customers would not pay the difference. Most critics of a livable minimum wage claim it would be a damper on the economy. Yet in every instance where the minimum wage was raised significantly, unemployment went down as the local economy was stimulated by the increased demand.  The additional income is mostly spent on necessities in the local economy.

Conscientious employers have proven the living-wage critics wrong time and again. Their businesses typically thrive, both because of the better mutual loyalty between employer and worker, and because the business just runs smother and is usually more responsive to customers as well because the owner has a better attitude about everyone. The public knows that the employment system in the U.S. is rigged to squeeze the workers and disempower them. That is why a new movement for economic fairness and justice is growing. At the same time, growing numbers of low-wage workers are recognizing that the only way they can break out of the trap they are in is to organize themselves and protest en mass. Despite continuing massive corporate propaganda, unions may be on the rise again.

Outsourcing America, or Reviving Our Economy
In the current situation of a continuing “wage recession,” we observe corporations sitting on vast quantities of cash. They hesitate to invest it in production, since low wages have driven demand for basic products so low. Everyone knows that a low-wage worker must spend every dollar s/he is paid just to survive. Production depends on demand. Corporations send capital overseas to reduce production costs and attempt to sell cheaper goods to workers here who cannot afford them. A shrinking middle class trying to survive on unsustainable poverty wages cannot maintain high levels of consumption. The rich can only buy so many mansions and yachts. The super wealthy corporate elites park their riches in financial instruments that contribute little to the real economy that would otherwise need workers at livable wages.

It is time to reassess the entire framework of the dying American economy. Narrow short-term corporate interests are destroying the potential for capital to be invested in creating many needed jobs in this country. The nation needs to do much work in areas that serve the public interest – such as energy efficiency – providing livable wages in the process. A massive investment of existing capital in converting the carbon economy to self-sustaining energy production and conservation would require many jobs. The fossil fuel industry cannot and will not provide such jobs – they are in the public interest, not the fossil fuel industry’s interest.

The so-called free market is anything but free. Capital has been put to many uses that cost society far more than their value to society and now even threaten our survival. Capital enables and empowers social action. Only a realignment of the role of capital in the new economy can make a livable society possible.

Predators Like Us

Leave it to a practicing member of an indigenous culture to “say it like it is,” in the most direct way imaginable. I had watched a very interesting episode of “Nature” on PBS (January 28, 2015), about the incursion of killer whales into the Arctic seas. It got me thinking of the predatory practices of ‘Man’ in the world, writ small and large. The arrival of killer whales – Orcas – happened because of the warming of those waters due to human induced global warming. The disruption of local ecologies has not been caused by human predation by indigenous hunters. Instead, humans have plundered various components of the earth’s systems on a planetary scale, with increasingly obvious destabilizing effects.

The killer whales are hunters, perhaps the most effective hunting species in all the oceans of the planet. Their effectiveness is largely due to their highly complex communication and coordination in trapping and dispatching their prey. Orcas are among the very smartest mammals of the sea. They have played their predator role in balanced oceanic ecologies for a very long time. But now, planetary scale human environmental predation has resulted in climate changes that allow the Orcas to range much farther north than ever before. They now reach into arctic seas where they had never before ventured. Such changes have consequences.

The hunting practices of killer whales since their Arctic incursion have altered the ecology of the region. In talking with the PBS film makers, an Inuit hunter commented on the effects of the arrival of killer whales in his hunting grounds in a very matter of fact way. The Orcas attack Narwhal (Monodon monoceros), a medium sized predatory whale that feeds primarily on small deep-water flatfish and codfish. The Narwhal is a critical component of the Inuit diet. Because of its rapier like snout protruding like a horn, Narwhals are called the “unicorn of the sea.” With only about 75,000 in existence, primarily in the Arctic, they are classified as ‘near threatened” with extinction. With the incursion of Orcas into the arctic and their prodigious group hunting skills incorporating military-like strategy, Narwhals survival as a species could be more severely threatened.

The Inuit hunter casually commented, “They are predators like us.” That got me to thinking of the many and various ways humans are indeed quite predatory creatures. In the past, and still today for some indigenous peoples in various locations around the globe, humans are predators. Within a particular region their predations are mostly in balance with the other elements of the local ecology. In some other settings humans may be primarily pastoralists or agrarian peoples rather than hunters. Industrialists, on the other hand, are primarily predators, but their prey are not limited to animal populations. They (we) prey upon the land itself and extract all manner of materials and organisms needed for industrial processes.

In some regions where severe drought or other climate changes have disrupted a local ecosystem, indigenous groups may over-hunt or over fish. They may also over harvest forests, just like the Easter Islanders did, severely damaging the ecosystem upon which they depend for survival. But the Inuit, human predators in the arctic, did not disrupt the ecological balance between Narwhal, and Orca – there never was one. Before climate changes allowed their northern migration, Orcas were not part of that ecology. Instead, it is the predatory extractive practices of modern industrial societies far away that have altered the relationships between arctic species, including humans.

World industrial economic waste has changed climate conditions so that an external species could enter the arctic ecosystem, disrupting its former balance. All the long term local consequences of this ecological disruption will not be known immediately. It is likely, however, that at minimum local Inuit hunters will be forced to adapt to a declining Narwhal population. Similar situations are occurring all over the world. The particulars in each case are different. But the process is the same.

Planetary climate disruption has diverse local effects, from drought to floods to more powerful storms to changed water temperature and ocean acidity. These changes can alter species relations either with each other or with changed conditions of their environment. In each case the result is the same: increasing rates of species extinctions. [“Climate deniers” seem incapable of thinking of complex systems or consequences of interactive changes within or among them.]

The industrial age was born of a culture that perceived humanity as separate and apart from nature and preordained to dominate it. Western industrial culture was launched and is driven by the belief that is it destined to control the natural world. Such beliefs, or very similar ones, are now held worldwide. Yet the world industrial system is just past its peak. The near exhaustion of resources to extract, the record concentration of wealth, the faltering of the world financial system all collide, producing chaos. They both cause and combine with the tipping point of earth-systems destabilization to form the greatest crisis of human survival ever. The world economic growth machine has hit the wall.

The earth systems that could sustain industry at smaller scale as innovative technologies accelerated exploitation of limited resources are now being destabilized. Contrary to the ideology of individual free will in an economy of ever-expanding opportunity, Mother Earth presents us with a very limited choice. Either adapt to the realities of earth-systems limits or die. To survive we have but one choice. Human populations must radically change the ways we live in the real world by abandoning the illusions we have held to for centuries.

Magical Thinking: It’s Everywhere and Getting More Dangerous

We all labor under certain illusions, some modest and minor, others enormously majestic. Social illusions have always been with us. We tend to think of the myths of “primitive” peoples as illusions and our own beliefs as facts. But that may be the biggest illusion of all. Some of what at first appear to be outlandish illusions turn out to be, on further investigation, valid and useful. Sir Isaac Newton and Albert Einstein come to mind. Their scientific theories were at first dismissed as blasphemous or absurd.

Illusions, Then and Now
For millennia, human groups have labored on the basis of illusions, myths, or stories. Such stories gave them a conceptual framework for making decisions about their lives in the places they inhabited. What seems to confuse us moderns is that the stories on which ancients and “primitives” depended for guidance in their lives seem so fanciful and unreal. Yet they worked. As anthropology eventually figured out, the myths of ancient and indigenous peoples worked for them in their time and place. That is because they were consistent with the conditions of life for those groups in their environments. However little sense they make for us, their structure and content led to useful behavior for the tribe, or group, in the lived environment. However unreal the myths of others may seem in our modern and post modern context, they worked in their time and place.
Today, the stakes are much higher at a vastly larger scale. Many of the myths and stories we believe are increasingly unrelated to the conditions of modern life. The social and environmental conditions of the modern world have changed radically in the last two hundred years. The illusions of any era seem perfectly reasonable to those who believe them. In more stable times, those illusions were relatively stable over time and were consistent with the conditions under which people lived. When they were not, the group that held them in spite of changing conditions died off because their myths failed to lead to the decisions needed for survival.
That’s pretty much where we find ourselves today, except that the scope and depth of changing conditions are worldwide and “mission critical” for human survival. The scary part is that we may very well be wandering down the same path to collapse as the societies of the past that failed to respond to changed conditions because they insisted on holding to the beliefs they had always felt comfortable with.

Science and Magical Thinking
We are very proud of our science, technology, and exploitation of fossil fuel energy, which have produced the conditions and conveniences of modern life. The exploitation of fossil-fuel energy has allowed an overabundance of new and entertaining products the world has never before known. We pride ourselves on our reasoning, our “rationality.” But in many ways such pride rests on illusions that can kill us.
Then there are the utterly foolish notions of those anti-scientists such as Senator James Inhofe.  In the face of mountains of evidence from all over the world for human caused global warming, Inhofe declared it all “the greatest hoax.” Inhofe’s magical thinking is, of course, closely tied to the oil and gas interests that support him.
The very science and technology that has for a very short historical period allowed us to live in relative luxury, have produced conditions that are disrupting the earth systems upon which we rely. But our industrial culture has failed to inform us of the dangerous environmental and social trends that have resulted from our extractive massive-waste producing economy.
Instead, the most important element of science itself, skepticism, has been suppressed by the culture of consumerism brought on by the economic domination of society by the corporate state. It is relatively easy to manipulate a population that is mostly unable to engage in critical thinking by encouraging and directing magical thinking. One of the key components of magical thinking is the ignoring of evidence – the Inhofe syndrome. In contrast, critical thinking is attuned to the many forms of illusions that marketers use to convince us to buy buy buy – both products and politics. Reasoning on the basis of evidence overcomes the untruths of magical thinking.

The Growing Danger of Magical Thinking
Magical thinking results from the capacity to ignore evidence in determining one’s beliefs. It is able to override both facts and logic in order to arrive at a comfortable belief that relieves the believer of the responsibility to critically judge all claims to knowledge. Magical thinking overrides facts and ignores logic in order to retain the comfort of believing that, for example, dire circumstances that may require us to make difficult decisions simply do not exist. We don’t want global warming to disrupt climate, damage crops, raise the sea level, and cause long term droughts, or produce resource wars, etc., etc. It is easy to ignore ominous facts if you allow magical thinking to shape your beliefs. The relief from responsibility is a powerful unconscious motivator.
The short term economic interests of some giant corporations are for people to not believe the overwhelming scientific evidence for anthropogenic climate disruption. Exxon-Mobil paid the same marketing and public relations propagandists that had helped the tobacco industry deny the harm done by cigarettes, to plant all sorts of “climate denial” disinformation in the mass media. Continued magical thinking resulting in “climate denial” puts us all at grave risk.