Swans Commentary » swans.com March 14, 2011  



Blips #106
 From The Martian Desk


by Gilles d'Aymery





"The danger of success is that it makes us forget the world's dreadful injustice."
Jules Renard (1864-1910), Journal, 1908
"The dispensing of injustice is always in the right hands."
Stanislaw Lec (1909-1966), Unkempt Thoughts, 1957


(Swans - March 14, 2011)   BERNANKE'S PREDICTION: Asked about inflationary trends, Federal Reserve Chairman Ben Bernanke assured Congress that "the most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation." He added, however, that "a further rise in oil prices may hurt the economy." On which planet is this guy living? That's the same Bernanke who did not see the real estate meltdown and the financial crisis coming! Does he ever fill the tank of his car at the local gas station? Of course not. He is driven around by a chauffeur who pays the tab with a credit card fully expensed by the FED. I suspect that either his secretary -- sorry, executive assistant -- or his housekeeper makes the trips to the grocery store on his behalf. This man is utterly removed from reality. Here's the news: The price of regular gas has reached $4 per gallon in San Francisco and $4.20 ($4.1999 to be exact) in the small rural town where I live. The price of diesel fuel is even higher -- and it's only March; the driving season has not even begun.

NOW, YOU SEE those 18-wheelers that deliver goodies to your favorite Walmart or supermarket...they happen to run on diesel, averaging between 4.5 and 7 mpg. They usually have a 300-gallon tank. Prices have risen about 22 percent in the last month and 60 percent in the past six months. Need a calculator? No inflation there, right? In 2008, the U.S. spent over $460 billion on fuel when the economy collapsed. Well, we are slowly getting back to the same level of expenses and the economy remains depressed. In February, car manufacturers had their best month in a long while thanks to many incentives (e.g., six-year no-interest loans). Some 989,808 vehicles were sold. Out of this total: 23,263 hybrids; 343 plug-ins (electric); and 6,337 clean diesels. But almost 440,000 were gas-guzzlers. Take Ford, for example: The company boasted on its Web site that the new Fiesta had its "best sales month ever," with 6,270 copies. It also sold 1,379 hybrid Fusions and 795 hybrid Escapes. However, its Explorer SUV increased 268 percent to 9,657 and its F-series truck line reached a hefty 37,549 copies. Old habits are hard to break. Reminder: Americans are 4.5 percent of the world population but consume 25 percent of all produced oil.

HIGHER FUEL PRICES also have a direct incidence on farmers and therefore on food prices. So, not surprisingly, once again, "the Food and Agriculture Organization Food Price Index (FFPI) rose for the eighth consecutive month, averaging 236 points in February 2011, up 2.2 percent from January and the highest (in both real and nominal terms) since January 1990, the inception date of the index." Before sharing a tidbit that should make readers sick to the stomach, so to speak, let me express my frustration with Web links (URLs).

ONE GOES TO great lengths to reference the material used by including the URLs of those sources. So, for instance, in my past Blips, when referring to the FAO FFPI, I conscientiously inserted the link to the page of the FAO Web site where the FFPI was shown. So, for these Blips, I went back to the same URL, only to find the dreaded 404 -- "this page does not exist." I had to do a search to find the new location. In the Blips #102 and 104 the URL was http://www.fao.org/worldfoodsituation/FoodPricesIndex/en/ -- and I can assure you it worked. One month later, the URL has become http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/. Why, for heaven's sake, did they have to insert a new directory, /wfs-home/? This phenomenon has become a recurring happenstance. Web pages vanish or change location; even entire Web sites and Blogs are taken down without notice, with the end result that it pretty much invalidates one's on-line research. Very frustrating, indeed.

ANYWAY, LET'S GET BACK to my food story, which I found in The New York Times "Sunday Styles" section on March 6, 2011. Contributing writer Bruce Feiler wrote the following in "Take Back the Trash":

The National Institutes of Health reported in 2009 that American food waste has increased 50 percent since 1974 and now totals 1,400 calories per day per person. Some estimates place the total amount of food thrown away in the United States every day as high as 40 percent of all the food the country produces.

ONE BILLION human beings suffer from malnutrition, undernourishment, and hunger around the world while in the land of obesity as much as 40 percent of "all the food the country produces" is wasted. I don't know about you but this is so disheartening and sickening that I want to shout: Where is the indignation? WHERE IS THE INDIGNATION? I have had the deep privilege of not knowing hunger ever. When I grew up in the 1950s and '60s, I had -- day in and day out -- breakfast, lunch, a snack in the afternoon, and a copious dinner. I ate 100 grams of meat almost daily (the supposed norm at the time) except on Fridays when fish was served (then a Catholic tradition). I had plenty of bread, cheese, veggies, fruits, etc. But, for sure, food was not to be wasted; not even a slice of bread would be left uneaten. When meat would remain it would go into the making of an hachis parmentier. I do not remember an ounce of food being thrown away. My father had been imprisoned in the Buchenwald concentration camp during WWII (he was a resistant). He had known hunger and deprivation. To waste food was unthinkable to him. I recall one evening -- I was in my early teens -- when endives were served for dinner. They had a very strong bitter taste and I refused to eat them. My father forced me to ingest the darn vegetable. I did, and then I vomited the food in my plate. The next evening, the vomited endives were lying on my plate to be eaten... My grandparents, with whom I lived for years, had known the Great Depression and food scarcity. Though not as forceful as my father, they too were insistent that food not be wasted. My grandma also served endives, which I literally hated, but she was a gentle woman and a smart chef. She would cook the endives wrapped with a slice of ham and tons of Gruyère, thus eliminating the bitterness of the witloof chicory. Three- or four-day-old hardened bread would be softened with water and fed to the dogs. Turning lettuce and tomatoes, etc., found their way into the hens' and chickens' diet, which, in turn, provided the household with wonderful eggs and tasty meat.

AS SAID, old habits are hard to break -- the good and the bad ones. I may not match the fervor and the discipline of my parents and grandparents, but practically no food from this household ever reaches landfill. I drive to the dump every two to three weeks with two cans of recyclables -- bottles, cans, packaging, paper, etc. -- but only throw a bag of garbage on a bi-monthly basis at most. I may not be able to send leftovers to hungry people, but I do not throw food away -- I'll share it with our two dogs, and the few veggies that turn bad end up in our composting bin so they will return to mother Earth.

SHAME, SHAME, SHAME. Our so-called civilized society is a blight on the very concept of civilization. Our socioeconomic paradigm, based on waste and destruction to enrich the few and drive the many into immiseration, must be overturned, overthrown, obliterated. A stake must be driven through the heart of this Dracula.

THIS MONEYED VAMPIRE keeps destroying entire nations. Last week, the rating agency Moody's downgraded Greek sovereign bonds three notches. They are now rated like junk bonds. Greece, in the midst of a steep austerity program and the privatization at fire sales of its public assets, has no way of repaying its debt. Its sovereign debt will reach close to 150 percent of GDP in 2013. A restructuring of that debt will eventually be inevitable. Still, it's not happening. Why? According to the Greek Public Debt Management Agency, the debt has been financed between 2005 and 2010 by banks (43%), mutual funds (22%), pension funds (15%), asset managers (8%), and hedge funds (4%). In other words, the Greek people are driven into the ditch so that the profits of private investors remain whole. And of course, the banks are mostly European (Germany, France, Austria, Belgium, the UK, etc.). Not satisfied enough, Moody's also downgraded Spain's debt one notch to Aa2. Next will be Portugal and Ireland, yet once again. Time after time, the moneyed class feeds on the blood of the people. Vampire, indeed.

PUNDITS, POLITICIANS, "EXPERTS" keep advocating shared sacrifice on the part of the people. Everywhere in Europe and in the U.S. unions are busted; services drastically curtailed; teachers, firefighters, policemen and women laid off. Medicare, Medicaid, and Social Security must be reformed -- read cut -- so that the famed budget will eventually get back in the black. No more red ink, clamored the acolytes that carry the economic thurible. The liturgy of sacrifice, sacrifice, sacrifice; privatize, privatize, privatize; compete, compete, compete, remains the mantra that supposedly will "win the future." But the future for whom?

IN ITS LATEST GALLERY of the world's billionaires Forbes reports that in 2010 the "list broke records in size (1,210 billionaires) and total net worth ($4.5 trillion)." That's 214 billionaires more than the preceding year. The wealth of these 1,210 billionaires surpasses the German GDP. The wealthiest man on earth, Mexican Carlos Slim, has jumped $20 billion to reach the "modest" patrimony of $74 billion. Russia went from 60 to 101 billionaires; China jumped from 69 to 115 -- and that is not counting Hong Kong (25 to 36). You also have 55 Indians, 26 Japanese, 19 Turks, 14 Indonesians...and the list goes on. Again, the U.S. leads the way with 413 happy few, or 33% of the list, though Forbes is quick to add that its percentage is decreasing. It was 40% in 2009 and 50% ten years ago. See how the country is becoming more egalitarian! Charles and David Koch, the brothers behind the Tea Party and union-busting, are tied in 18th position, each worth $22 billion. John Paulson, the hedge fund manager, whom I have covered over the years, is now in 38th position with $16 billion. (Recall that Paulson made the list in 2007 with $2.5B; in '08, $3B; in '09, $6B; and in 2010, 12B.) And yes, Facebook's Mark Zuckerberg is worth $13.5 billion. REMINDER: One percent of US households controls 42 percent of the country's financial wealth. Only 7 percent is controlled by 80 percent of the population.

WANT TO BALANCE THE BUDGET? Instead of squeezing 80 percent of the people, go where the money is to be found. As Warren Buffett, the "sage of Omaha," told Christiane Amanpour on ABC's "This Week" (November 28, 2010): "I lived in periods where capital gains taxes were 39.6 percent, when earned income taxes were 70 percent and our economy did just fine." Actually, he is absolutely correct. There is a correlation between higher marginal taxes and higher economic growth. Economist Mike Kimel, the founder of Analytic Economics, writes on his Presimetrics Blog that...

... from 1981 to the present, the period in which Reagan's philosophies have reigned triumphant, the correlation between the top marginal tax rate and the annual growth in real GDP has been positive. That is to say, higher top marginal tax rates have been associated with faster, not slower real economic growth. Conversely, lower top marginal tax rates have coincided with less economic growth.

The positive relationship between the top marginal tax rate and the growth in real GDP is very nearly bullet-proof. For instance, it extends all the way back to 1929, the first year for which the government computed GDP data. Additionally, higher marginal tax rates are not only correlated with faster increases in real GDP from one year to the next, but also with increases in real GDP over the subsequent two, three, or four years. This is as true going back to 1929 as it is for the period since Reagan became president.


... since 1981, unemployment rates have generally shrunk faster when tax rates were higher than when they were lower.

(Source: "The Effect of Changing Top Marginal Tax Rates," December 7, 2010 -- http://www.presimetrics.com/blog/?p=253.)

TO INCREASE TAXES on the wealthy is not just a matter of social justice. It also makes sound economic sense. These taxes, by the way, should include the inheritance tax, a tax that Warren Buffett also favors -- and, of course, capital gains. But there is much more that can be done to balance the budget. The European Parliament recently passed a non-binding resolution in a 529 to 127 vote to introduce a kind of financial transaction tax (FTT) known as the Robin Hood tax -- a tax of 0.05 percent to be levied on the banks and financial institutions on a wide range of transactions. If implemented, that tiny tax will raise about €200 billion in Europe alone. Austria, France, Germany, and Spain support the measure. (Warren Buffet supports it also.) Unfortunately, London, which is the largest financial center in the EU, is still not on board.

LET'S GO ONE STEP FURTHER. In researching this topic I stumbled upon a note (#51 as of March 8, 2001) on the Wikipedia entry on the Tobin tax: "Stephan Schulmeister, Margit Schratzenstaller, and Oliver Picek, 2008. A General Financial Transaction Tax. Motives, Revenues, Feasibility and Effects. Research Study by the Austrian Institute of Economic Research, co-financed by Federal Ministry of Finance and Federal Ministry of Economics and Labour,
URL: http://www.wifo.ac.at/wwa/servlet/wwa.upload.DownloadServlet/bdoc/S_2008_FINANCIAL_TRANSACTION_TAX_31819$.PDF" In their 76-page report the authors show that a 0.1 percent FTT could raise over $900 billion a year. Read again: a minuscule 0.1 percent would bring over $900 billion a year. Remember, such an FTT would be levied on the banks and financial institutions that the taxpayers had to bailout in 2008 and 2009. Isn't it about time they too sacrifice a little bit? Just imagine raising that minuscule rate to, say, 1 or 2 percent!

SIMPLY STATED, we have to bury the neoliberal economic doctrine that has failed our societies for over four decades and immiserated large swaths of the world.


A FEW WORDS ON LIBYA: A reader from down under asks "What about Libya?" How come Swans has not commented on the conflict as the nasty "imperialists" are circling shark-like around their prey, siding with the National Transitional Council, known as the "rebels," and insisting that the Gaddafi regime steps down now? Simply put, I do not understand and I am unfamiliar with the dynamics that lie behind this ongoing tragedy. I mentioned in my last Blips that the uprising started in the poor, desolated eastern region, as I have focused my attention on the socioeconomic and material conditions that, in my opinion, have been the main cause of the revolts in Tunisia and Egypt. Indeed, as Nicolas Pelham (a former correspondent for The Financial Times and The Economist and currently a senior analyst for the International Crisis Group) noted in "Zero Hour in Benghazi" (The New York Review of Books, March 8, 2011), "The second city of Africa's richest country, Benghazi, is a pot-holed, battered wreck."

PELHAM'S ARTICLE is worth reading for it provides the context in which these events are unfurling, even though he remains silent on foreign interference, which is not surprising since he is on the payroll of the International Crisis Group, a prominent organization bankrolled by Western elites. But there is more to this conflict than purely economic and political matters and foreign interference. Libya is a tribal country going back to the time of the Ottomans, when the territory of what is today's Libya, which was stitched together by Fascist Italy, was comprised of three provinces with about 140 tribes, some 30 of them being influential. To get an aperçu of this human mosaic, read "Libyan Tribal Map: Network of loyalties that will determine Gaddafi's fate," by Abdulsattar Hatitah in the English edition of Asharq Al-Awsat. It's bewildering and I cannot make much sense of it. The upheaval quickly turned into a violent confrontation, which is being described as a civil war but may well be a tribal war, or any combination thereof. I simply do not know. Are we looking at the breaking of Libya into three tribal nations? And, as always, who will control the oil? Can any "anti-imperialist" answer these questions?

SO, WHEN KNOWLEDGE is amiss, I generally tend to remain silent, or at least cautious. I don't even fathom at this point why the Western powers turned against Gaddafi since the latter had fully joined the neoliberal order in 2003. Europeans imported 85 percent of Libyan oil exports (25 percent of Italy's oil needs comes from Libya). The major Western oil companies (e.g., ENI, Repsol, Total) were strongly implanted in the country. Economic relations were extensive. It made little sense to turn against the regime. Perhaps the Western chancelleries felt that Gaddafi would go gracefully, eased out of power like Ben Ali or Mubarak. If so, this was a major miscalculation. Contrary to Tunisia and Egypt, where the respective regimes remain in power -- only the heads of states and a few acolytes have been booted -- in Libya there is no regime in place without Gaddafi, which would mean a potential power vacuum. Credible information is scant. To this day, I do not know who is behind the "rebels," who the members of the National Transitional Council are, and what is their sociopolitical platform. I could easily list a series of 20 questions to which I have no answer. One does not write analyses of events without factual knowledge, at least if one wishes to keep his reputation intact and not turn into a fool.

YET, SOME IN THE "ANTI-IMPERIALIST" CROWD have been siding with Gaddafi because the naughty (and hated) "imperialists" have sided with the "rebels" -- the moment the West said he had to go, then he should be defended. Some even have advocated that one should side with Gaddafi because he is a "socialist." What balderdash and flawed logic! To follow such reasoning, one then should have sided with Mubarak the moment the U.S. requested that he step down! To side with a violent thug, which is what Gaddafi really is, just because your enemy (the "imperialists") turned against him, is utter nonsense and demonstrates, once again, the intellectual vacuousness of various so-called revolutionaries. As for those who claim that Gaddafi is a socialist, my medical advice is that they should get an MRI in a hurry -- your brain cells have been frozen or decimated for about 40 years! Please excuse the sarcasm. (Note to the letter writer: I'd suggest that attacking Louis Proyect -- a comrade, supporter of, and loyal contributor to Swans -- won't get you very far in my book...)


FINALLY, I WOULD BE REMISS not to conclude these Blips with a thought (and human prayer) for our Japanese brothers and sisters. For the past couple of years, and increasingly of late, I have witnessed much pessimism and discouragement among people, including Swans readers and contributors. Charles Marowitz, a pillar of my publishing efforts, has been facing dire difficulties due to the economic crisis. My dear wife, Jan Baughman, according to her own account, is close to the tipping point as she has to manage the stress of her job and my own personal struggles, navigate the heartless elder-care system in which her 90-year-old father is spiraling, while trying not to worry about finances. Many a friend and acquaintance are going through this practical and emotional roller coaster -- and things will get worse before they hopefully improve. Looking at the Japanese devastation, I'd recommend we all take a deep breath, understand that life is a gift to be cherished, and remain all in solidarity with each other -- even the fools among us. The Japanese ecological onslaught is yet another sign of times to come. More than ever, we need to stick to each other, focus on workable solutions to our human predicaments, and not fall into despair. Absent optimists rounding the wagons, reactionaries will rush in like a tsunami and we'll all end up drowned in an ocean of pain. Think of Japan and whatever could turn out to be worse. Then act accordingly. Love your brothers and sisters. SOLIDARITY!

 . . . . .

C'est la vie...

And so it goes...


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Published March 14, 2011