FW: Occupy Wall St movement - a view point by Greg Canavan

[Harshinder Singh]

 

From Greg Canavan in Sydney on Occupy Wall St protests :

-- Occupy Wall Street (OWS) has gone global. Thousands are out on the streets in major financial centres, protesting against... something. That's not meant to denigrate the movement.

-- The protesters are mostly (but not exclusively) young and disillusioned. They know something is up. They feel something is terribly wrong with the way the world operates. But through their youth and ignorance they can't put their finger on it.

-- So the protests are incoherent. Not surprisingly, young people who have been educated in left-leaning universities and brought up to think the world owes them something want to blame 'Wall Street' and the 'rich'. They want wealth distributed and the world to be more 'fair'.

-- There are two ways of looking at the OWS movement. One, like conservative commentator Janet Albrechtsen, is to dismiss the movement as belonging to left-wing crazies who just want stuff without working for it. Her column in yesterday's Australian was as ignorant about the real causes of OWS as the protesters are. Talk about irony. This is her take on it:

'If the populist "we want stuff" message from the OWS protesters finds its way into the White House and Congress, then the US economy is in for an even tougher time than at present. With spending at record levels since World War II, a $US4 trillion federal budget and a $US$1.65 trillion deficit, the path to economic growth is surely not pandering to a group of city campers who want stuff because, well, that's just what they want...'
 

Perhaps she doesn't realise that the source of these demands lies in the fact that bankers got money without working for it. High unemployment and a mal-adjusted economic structure lead to everyone wanting a bailout.

-- The other way of looking at the OWS movement is to see it as an accompaniment to the breakdown of the current financial system. It's societal upheaval joining in with financial upheaval. As they've done throughout history, the two go hand in hand.

-- The global system of finance is broke, both actually and figuratively. It's riddled with corruption. Built on a brittle foundation of unsound money, the termites (politicians and bankers) have gorged themselves and riddled the structure.

-- Writing in Vanity Fair earlier this year, economist Joseph Stiglitz produced some data that readily explains why people are hitting the streets, even if their demands are confused.

-- He pointed out that the top 1 per cent of Americans (by wealth) takes in nearly 25 per cent of the country's income. They control a whopping 40 per cent of America's wealth. That compares to 25 years ago, Stiglitz says, when the top 12 per cent controlled 33 per cent of the country's wealth.

-- There's more. The top 1 per cent has enjoyed an 18 per cent increase in real incomes over the past decade while the middle class have actually seen their incomes fall.

This goes to the heart of the matter. America's middle class has seen a long-term decline in their living standards while life for the top 1 per cent just gets better and better. But Stiglitz can't find the source of the problem.

-- You know our take on it. The source of the problem is the Federal Reserve. It should be no surprise that the 'top 1 per cent' mostly come from the finance industry. If you remember our previous rants on the Fed, you'll know that when the Fed lowers interest rates it does so by creating money and depositing it in the commercial banking system.

-- This new money sits as reserves in the banking system. Through fractional reserve banking, the banks then multiply this money (which takes the form of credit, or debt growth). Like a pond with a rock thrown in it, the money then ripples through the economy.

-- The rock is the central bank dumping money in the banks' reserve accounts. Those closest to the impact (the banks and initial borrowers of the money) benefit first. Soon, the additional credit in the economy translates into higher prices. By the time the diminished funds wash through the middle and lower classes, they have already been hit by price increases.

-- This policy of 'inflationism', perpetuated by the Fed, is what concentrates the wealth in the top 1 per cent and lowers the living standards of nearly everyone else via inflation. If capitalism was the problem, the 'top 1' per cent would be dominated by capitalists - or industrialists - and not by bankers who rely on money printing and government subsidies.

-- While his left-leaning tendencies probably stop him from seeing the world through the prism of Austrian economics (and therefore the corruption of the 'system' through unsound money) Stiglitz still does a good job in explaining why US (and global) citizens are getting angry

'Virtually all US senators, and most of the representatives of the house, are members of the top 1 per cent when they arrive, are kept in office by money from the top 1 per cent, and know that if they serve the top 1 per cent well they will be rewarded by the top 1 per cent when they leave office.'
-- And this. Keep in mind Stiglitz wrote this in May this year, well before OWS become an acronym:

'Of all the costs imposed on our society by the top 1 per cent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important.

The top 1 per cent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn't seem to have bought: an understanding that their fate is bound up with how the other 99 per cent live. Throughout history, this is something that the top 1 per cent eventually do learn. Too late.'

-- You may think this is a uniquely US problem that has nothing to do with Australia. That would be naïve. It's the beginning, or continuation if you count the protests against austerity in Europe, of a societal reaction against the corrupt nature and flawed structure of the global financial system.

-- What happens over there will impact sentiment and stock prices here.

-- You have a ringside seat to an unfolding western financial revolution. You may as well enjoy it.
 
 
An article by finance writer Bill Bonner from Paris, France:

Yesterday, rumors circulated that the Europeans had their problems in hand. The Dow rose 180 points. The euro went up too, and now trades at $1.37. For all the talk of a disintegrating Europe, the euro has been holding together pretty well.

Gold fell $23 for no apparent reason.

As the day went on, however, the euro solution looked less and less like a solution and more like a disaster. Moody’s took Spanish debt down two notches...and warned that it was looking at France. The New York Times has the story:

Moody’s warned late Monday of a possible downgrade to France’s flawless credit rating. French finance officials worry that any such move would make it hard for Paris to negotiate solutions, according to an official who was not authorized to discuss the situation publicly.

The rally in American stock markets was set off by a report late Tuesday on the Web site of The Guardian, a British newspaper, that France and Germany had agreed to increase the size of the rescue fund — the European Financial Stability Facility — to as much as 2 trillion euros to contain the crisis and backstop Europe’s banks. But almost as soon as those hopes soared, European officials quickly brought them back to earth, with denials flooding forth from Brussels, Paris and Berlin.

This latest round of rumors and rebuttals about a European solution was a repeat of earlier situations... Such episodes have played out several times since the debt crisis intensified this year. Most recently, investors have been pegging hopes on a meeting of Europe’s leaders set for this coming Sunday in Brussels, anticipating that a comprehensive solution to the debt crisis might be unveiled.

Now that the rating agencies are circling France, the whole rescue project is in danger. It is one thing for the big, strong nations — France and Germany — to rescue the little, marginal nations, such as Greece and Ireland. But who’s going to rescue France?

At some point, the Europeans are going to be forced to either default honestly and painfully...or to bail themselves out boldly and fraudulently, like the Americans.

Here in Paris, sitting in the Café Vavin, we watch disasters develop on two continents at once.

As to the US mess, we think we understand what is going on. The Americans are on the path of self-destruction. They’ll pick up speed, until they finally reach their destination. But as to what is going on in Europe, we have no better idea than Nicholas Sarkozy or Angela Merkel.

We stick to our guns. Yes, dear readers, guns are what you are probably going to want. Right now, the revolutionaries are mostly peaceful. That’s how revolutions begin. The elites think they can manage the situation. They express their sympathies to the protestors. They promise reforms.

“We are on their side,” says President Obama.

New Yorkers are overwhelmingly behind them. And the press — which ignored them for weeks — suddenly finds nice things to say about their cause, when they can figure out what their cause is.

Later on...when the protestors become more violent and more determined...and after the elites push back...then you’ll wish you had guns.

The police will shoot the protestors. Then, the protestors will shoot the police. They’ll probably both be shooting at you. It will be a real revolution!

And what’s behind it?

Forty-six million people on food stamps.

One hundred million who have not had a real raise in 40 years.

Twenty-five million without real jobs. Twenty million who will never have real jobs.

One out of five mortgaged homeowners who are underwater.

But that’s just the beginning. Wait until the hoi polloi begin to realize how things work.

We remember when the government was throwing money at “minority” contractors back in the ’70s and ’80s. Politicians and lobbyists hustled to find a ‘person of color’ who could be a front man. Savvy businessmen formed new enterprises in their wives’ names. How women got to be a minority we never did understand, but that is how it worked. Maybe it still does. If you were a ‘minority’ you could get special treatment... You could become a zombie.

The next big feeding frenzy was the ‘War on Terror.’ Billions were being spent. Again, the insiders got on the phone and invented businesses to take the money — ‘security’ firms...logistics support...armor and equipment...food...training. Software was a favorite. You could spend billions developing software. Who knew if it worked or not? Arnaud de Borchgrave describes how the supply chain worked:

Billions have vanished into the offshore accounts of American and foreign contractors. In Iraq, an estimated $6.6 billion are unaccounted for.

To power anything at a remote outpost, a gallon of fuel has to be shipped into Karachi, Pakistan, and then driven 800 miles over 18 days to Afghanistan on roads that are sometimes little more than improved goat trails.

There are frequent ambushes by Pakistani bandits or Taliban guerrillas who impose “tolls” — and occasionally blow up tankers so others get the message. Then, as “green” legislation became a fad, the insiders saw another opportunity. They called in brothers-in-law and old friends. Engineers were hired. Contracts were let. Companies were listed on the public markets. The Bay Citizen, from San Jose, CA, reports: Three weeks before Solyndra, the solar-panel manufacturer, based in Fremont, declared bankruptcy, the United States Department of Energy issued a $197 million loan guarantee to another Bay Area solar company...

Like Solyndra, which failed despite a $535 million federal loan guarantee, SoloPower, based in San Jose, is a politically connected firm that produces thin film panels built with copper, indium, gallium and selenium (or CIGS) instead of silicon, the basis of most photovoltaic panels.

Energy Department officials have cited a worldwide drop in silicon prices as a major factor in Solyndra’s demise. Some analysts are now looking at SoloPower and asking why the federal government — as it worked furiously to keep Solyndra from going bankrupt — made a major investment in a company that relied on a similar technology.

In its six-year existence, SoloPower has experienced internal discord — it paid a $20 million buyout to its founders — and has yet to turn a profit.

Pretty sweet, huh? You start a business. The feds get behind it. The business never makes a penny. But you leave with a cool $20 million.

Good work if you can get it. And the people who can’t get it — the people without connections to the elite — are getting pretty upset about it.

Regards,

Bill Bonner,