Wednesday, September 21, 2011
ANALYSIS OF AMERICA'S NEW CLASS WAR
Impossible! That the Fed step aside to let the economy recover on its own. If employers were hiring then the Fed can step aside. Investors and employers are buying Treasuries instead of investing in companies and companies are not hiring to encourage investors to buy and sell their stocks. The cycle of decline reaches the end of the line. This action is a move on the part of the Fed to encourage banks to lend money to employers to hire and expand businesses and consumers to refinance mortgages at lower rates. It does not address individual banks and their current opposition to lending and refinancing restrictions. But it does hit them where it hurts, no more money kept in Treasuries with higher yields where capital can be parked.
Another myth propagated by the right wing to dispel Americans is the printing or more paper currency in circulation. Charging the Fed with hastening the worthlessness of the dollar in relation to trade balances. This does not depreciate the value of the dollar. The quantity of money in circulation in relation to quantity of commodities produced divided by their average price only affects the speed with which goods and service fall out of circulation and their price (inflation). Personally I don't see how Congress can send a letter to the Fed warning inflation. They obviously don't have a handle on the micro economics. Unless they know something the Fed does not know such as employers do not intend to expand production no matter what! This would be consistent with big business backing people like Perry to make sure Obama is not re-elected as the political priority and not jobs. The past 35 years business and politics have forged alliances that this semblance of a conspiracy is entirely plausible. The letter is an ominous warning and excellent insight of class struggle strategies on the part of Republicans. That employers will raise commodity prices in lieu of high rates in T-Bills to realize their profits. They warn Bernanke that inflation will devastate the American people. In other words, inflation is either the nail driving their re-election hopes into the coffin as workers will fall deeper into poverty or will result in victory in the demise of the American government.
On Monday, September 19, 2011 the four highest-ranking Republicans in Congress sent Bernanke this letter cautioning the Fed against taking further steps to lower interest rates. Their letter suggested that lower rates could escalate the risk of high inflation. See: http://finance.yahoo.com/news/Fed-is-expected-to-take-new-apf-96033563.html?x=0
Other laws govern the value of the dollar namely, economic laws in production. No jobs, no sales in august = 0% reflects the micro chasm between employers and workers. This chasm determines Trade Balances between Nations. Supply and demand only works when the system is working. But the system is not working! No one is working except the few who have jobs and are overworking. This chasm or what Marx called the class struggle in production and what Republicans term as 'Class Warfare' explains the motives of high ranking Republicans in their letter to the Fed. It explains why the IMF recommend governments not cut services too fast and not tax to quick. Proceed with caution! Consumers will not buy and employers will not hire and production will remain stagnant. Employers and workers were at a negative standstill in August producing 0 jobs and 0 hires. A negative equilibrium the Fed is trying to overcome with this recent move to pressure banks. That the Fed applies pressure on employers through a squeeze on banks offering T-Notes at a low yield is intended to encourage investment and discourage hoarding. It is a move to pressure banks to lend and refinance to get employers to expand and consumers to refinance their mortgages while interests rates are low. This strategy shows Bernanke unlike most of his predecessors, is a rationalist siding with workers in this class war realizing that employers are resisting to hire. American workers have a friend in the federal reserve and nothing but enemies in Congress.
The Debt to GDP ratio is a macro problem that without doubt needs to change. This relates to how governments do business in general. They borrow from central banks and spend to run government. Borrowing and spending is a system based on the cooperation et al, a 'social contract' between employers and workers. Banks will lend to government with the promise that both employers and workers agree on the terms for production, a New Deal was this social contract and banks knew government would be good for their money. For many decades the US paid its bills that is until spending shot through the roof mainly under Republicans. Hindsight shows that high deficit spending was a tactic in the class war and demolition of the New Deal and government generally to bring workers in line with employer demands. The social contract included government will tax both employers and workers and spend within its limits and be timely with their payments to their lender. Under the present class war the System of 'borrow to spend' is no longer viable. Employers are not willing to be taxed and workers are overtaxed in the United States and governments generally exceeded budgets through high war expenditures. All three parties breech the social contract, the workers being the innocent victims in the breech of the New Deal, their continual re-election of the same conservative brand of politics left them defenseless against the great breech of contract.
The chasm or class war between employers and workers, depending on the outcome of the next government shutdown and cliff hanger, rages forward. In the meantime, there are things this President will do through conscience to lessen the birth pangs on a macro level such cuts in war expenditures and moderate tax increases of employers. A the end of the day, the American people as Paul Sweezy predicted in 1974 will have to take on the battles their forebears died for in the class war of 1929 and bring the system down to reconstruct a new economy, leaving no stone unturned.
Posted by DXR at 8:43 AM