The Coming Depression: Capitalism Devours Itself

Compared to the Great Depression of the 1930s, the next one will be a Mega Depression brought on by escalating oil prices, resource shortages including water in California, the decreasing value of the dollar, lowered property values and increasing foreclosures and national US deficits and debts as far as the eye can see. Instead of investing in its people and infrastructure, the US has chosen the course of policing the world and spending its money on the largest miltary industrial complex the world has ever seen. At the same time, it's borrowing by the billions every day in order to keep taxes low (fiscal responsibility has been totally disconnected from reality and thrown to the wind). The debate should be about how to be fiscally responsible, not about raising or lowering taxes. Instead massive debt keeps lowering the value of the dollar and hedge funds have arbitraged the price of oil against the dollar. As the dollar goes lower, the price of oil gets bid up. Commodification of resources drives prices higher so that (as always) the poor of the world are affected first. Just as in a sinking ship, steerage (where the poorest people are) fills first, then the next level affected is the lower middle class, then the middle middle class and so on with the very rich usually being able to bail out in lifeboats as they did during the "Great" Depression. The rich never missed a meal. Only the lower classes were affected. If you're worth a billion dollars and you lose 90% of your money you still have 100 million. You can live on that very nicely.

Actually the Great Depression was sort of a joke compared to the reality facing us today. The only thing that really happened was that the stock market went kerfluie. So what!  All that means is that the investor class has lost some of its money. What does that have to do with the real economy? Of course, I'll grant you there was also high unemployment. That really hurt poor people, but not the middle class so much. Farmers weren't hurt, and there were a lot of small independent farmers in those days. There was a yeomanry unlike today where practically everyone is dependent on the system to a large extent. Small farmers during the Great Depression (as well as before and after) could feed themselves since on a typical dairy farm they also had chickens and hogs as well as extensive vegetable gardens. Vegetables were canned for the winter months. Hogs, cows and chickens were butchered for meat and dairy farms had milk and cheese in abundance.  The people that were hurting were basically unlanded surplus labor, factory workers whose factories were shut down. The yeomanry did just fine. Today there is no longer a yeomanry except for small businessmen and tradesmen like electricians and plumbers. The professional class - teachers, doctors and lawyers - again had no problems during the Great Depression. They still worked. Schools were not shut down. Local and state governments (unlike today) were not in financial trouble. They continued to function.

Today its a different story. There are no small farmers. Global warming has made the US one big disaster city. Every day we hear of a new disaster, Katrina only being the largest example. The Federal government, according to its philosophy of not doing anything to help the average person, deliberately let the Katrina victims suffer. They deliberately let the environment suffer, and they deliberately have gutted the Pure Food and Drug Administration letting poisonous foods and drugs, both domestic and imported, proliferate. The Federal government under the Republicans has opened the doors for corporations to prey on the middle class while undermining every Federal agency that's supposed to protect them. Politicians suck up to lobbyists and then go through the revolving door to become lobbyists themselves and make millions. Lobbyists write the legislation. Senators and Congresspersons don't even have time to read it before it's voted upon, and the political thieves insert earmarks at the last minute. A  drug benefit for seniors turns into a giveaway to the pharmaceutical industry and a further bankrupting force to the Federal government. Remember that during the Great Depression the Federal government was not bankrupt. Today it is owing some $10 trillion in national debt which again is driving down the value of the dollar. Capitalism is sinking without a shot being fired except against some other poor people who are no major threat to us. All the while we're throwing away $12 billion a month in Iraq while being told we're winning. If we're winning, why is the monthly outlay not diminishing? I'll believe we're winning when we're only spending $6 billion a month in Iraq, then $3 billion the next month, then nothing. But they want to occupy Iraq permanently, and now they're trying to get the Iraqi government to agree to let the US build some 50 military bases there without any accountability for American contractors and military personnel.

The Great Depression was largely due to the financialization of the economy at that time which allowed banks to operate in an unregulated manner. The Glass-Steagall Act of 1932 put a firewall between commercial and investment  banking which was eliminated by the Gramm-Leach-Bliley Act of 1999 thus allowing the financial sector to again run amok. The result was the sub-prime mortgage crisis which continues rolling along unlike the stock market internet bubble of 2000. Stock market bubbles usually burst at some point but the commodity market speculation bubble may continue to expand indefinitely due to rising demand and diminishing supply of oil. The mortgage, gas and food crises, unlike what happens in the stock market, affect real people in real ways. Commodities speculators can be sure that demands in these sectors will continue to grow so how can they go wrong in bidding up commodity prices. Unlike losses in the stock market which affect the rich investor class and increasingly average people who have traded defined benefit pensions for 401k's, losses in housing values, run-ups in adjustable rate mortgages and rising food prices affect the poor and middle class. Rising unemployment and Republican unwillingness to extend unemployment benefits increase the desperation and pain felt by those losing their homes, cars and boats. Even the rich are realizing that living the rich lifestyle and not putting anything away for a rainy day was not such a good idea especially when they can no longer afford to keep it up like Ed McMahon who has become the Gary Coleman of the 21st century.

Hopefully, Barack Obama will be able to create jobs by subsidizing the solar industry and incentivizing homeowners to put solar panels on their roofs as they've done in Germany thus decentralizing ownership of energy producing assets. To pay for these subsidies and incentives though, he'll have to take money away from the $500 billion spent annually on the American war machine. Of course, no politician will talk of the trade-off between new social programs and funding the war machine. They want to talk in terms of reducing benefits for social security or some other social program, but the real trade-off has to be solar instead of the war machine in order to maintain fiscal responsibility. Boo hoo, Republicans who love their war machine and have made a killing off it (no pun intended).

This would be the sensible course, but will anything get through the Filibusters-R-Us Senate. I don't think so. Rude awakening, America! The Republicans will still hold the cards and call the shots via the filibuster mechanism, and no one thinks there will be a filibuster proof Senate. That would require 60 Democrats and not all of them are reliable since they're in the pockets of the same lobbyists and large corporations as the Republicans. So massive frustration as Obama squirms and the US continues on the same insane path of massive deficits (both budget and trade), massive spending on the military-industrial complex while stingily spending next to nothing on the welfare of its people and the devaluation of the dollar leading to increased costs of imports from China and the Middle East who increasingly have the  upper and controlling hand. As Europe raises interest rates, the US will be forced to too in order to defend the dollar which is like trying to defend the Maginot line after the Germans invaded France. Too little, too late. And Bush talks of a "slowdown." Yeah, like the Great Depression was a slowdown. Only this is 10 times worse just as the folly of the Iraq War was 10 times worse than the folly of Vietnam. The only bigger folly was World War I. World War II, at least, had a legitimate purpose - to stop a madman - but it was brought on by - some think it was a continuation of - WW I.

So did I leave anything out?

US inflation soars on rise in energy costs By James Politi and Chris Bryant in Washington, Joe Leahy in Mumbai and Chris Flood in London Published: June 13 2008 14:15 | Last updated: June 13 2008 18:53