What’s Your Next Move?

Unemployment numbers for April were released last week, and much to everyone’s surprise there was a sharp decrease in reported job losses than the previous 6 months. The labor market shed 345,000 and the unemployment rate climbed to 9.4% and is expected to reach 11% by 2010. The Wall Street Journal reported last week that when figuring in the underemployed, the unemployment rate is 16.4%.

Below are the reported job losses and unemployment percentages since September 2008:
Sep. – 321,000 – 6.2%
Oct. – 380,000 – 6.6%
Nov. – 597,000 – 6.8%
Dec. – 681,000 – 7.2%
Jan. – 741,000 -7.6%
Feb. – 681,000 – 8.1%
Mar. – 652,000 – 8.5%
Apr. – 504,000 – 8.9%*
May – 345,000 – 9.4%*
- bls.gov
* The final numbers for April and May are still preliminary numbers and are subject to change once finalized.

The website Propublica has been doing an investigation on the current state of unemployment in the US and offer a lot of valuable information regarding state by state unemployment statistics.

One interesting bit of information is the stats on state unemployment benefit programs.  Since states are allowed to set their own rules and restrictions on unemployment benefits,  what state you live in while being unemployed can make a big difference.  In some states you can fired or quit and still qualify for unemployment…in others you can only be laid-off for economic reasons in order to receive unemployment benefits.

Another interesting piece of information is the average amount of unemployment benefits paid out in each state.  Unsurprisingly, “Right to Work” states tend to pay out the least amount in unemployment checks.

Propublica also provides an interactive map showing states drowning in red ink due to unemployment.  Prior to the economic crisis many states were not providing adequate funding to their unemployment benefit programs and the wave of layoffs has been more than they can handle.  As of now, 13 states are in need of even more funding from the federal government to maintain the current and newly unemployed, and 17 states are in danger of needing additional funding soon.

Another looming aspect of the crisis that has yet to be seen is the collapse of state governments.  As California (one of the states in need of additional funding for unemployment benefits) creeps closer and closer to bankruptcy,  other states appear to be on the same track.  As consumer spending lags and more and more business report losses for the next few quarters, there is going to a be a tremendous amount of would be tax revenue that is lost.  Elements of public works could possibly deterriate…schools, roads, public utilities, etc. Ultimately, the business losses are going to translate into more commercial bankruptcies, and as more commercial real-estate comes back on to the market there arises the possibility of a commercial real-estate collapse.

As the global economic crisis tears through continent after continent, there are some flashpoints to consider:

1) US/UK Debt: as debt levels approach 100% of GDP, it is almost certain that the AAA credit ratings of both the US and the UK will be slashed. As a consequence, the cost of insuring US/UK debt will reach the stratosphere, making even corporate bonds cheaper to hold. The result will be a generalized dumping of US Treasury bonds by foreign central banks, a resultant political upheaval, and runaway inflation as the Federal Reserve tries to print the US out of collapse.

2) European Banks: the major banks of Germany, France, Italy, Spain, etc. have lent out enormous amounts of money to Eastern European countries which simply cannot be paid back. The result will be massive defaults on these loans, more IMF bailouts, and huge losses for European banks and thus a general stock market route.

3) Commercial Property/Credit Cards: both commercial property and credit card defaults are set to take a serious toll on US and European financial institutions. The losses from commercial property will far outweigh the losses from home mortgages, as they have been leveraged much higher. A second credit crisis would result from this, leading to more bailouts and thus more stress on the debt-laden US/UK governments.

4) Israeli Aggression: the Israeli government continues to threaten Iran with violence for exercising its rights as a sovereign nation. Israel’s case that Iran is building nuclear weapons does not address Israel’s own large arsenal, nor the fact that Israel has committed at least one act of aggression against every country in the entire region. If Israel attacks Iranian nuclear facilities, the Iranian retaliation could led to a massive war and a surge in oil prices to $200-300 a barrel, leading to massive inflationary pressures on consumers and a rapid decline in what is left of industrial output worldwide.

5) US Aggression: currently the US government is escalating a massive war across South/Central Asia which could easily lead to the collapse of the Pakistani government and a massive spillover into India. The potential for regime change in Pakistan could trigger Indian provocations, leading to a nuclear war that will devastate the region and release a cloud of devastating nuclear fallout that will sweep the globe much as the Chernobyl disaster. Furthermore, recent US moves in Korea and Iraq have led to the possibility of conflicts there as well, though the potential for the stabilization of these conflicts far outweighs the likelihood of a downward spiral in Pakistan. Such conflicts could lead to stock market panics and runs on government bonds as well.

Let us hope to soon add a 6th: a revolutionary government rises to power in a major power like the UK, China, France, Japan, etc. That would be a threat to the stock markets that could lead to great benefits for people, rather than disasters.

It is simply amazing how well the American media’s propaganda machine works. We are only months into this Depression and the word on everyone’s lips is “recovery.” Losing 500,000 jobs a month rather than 600,000 does not a recovery make . . .

The talk of recovery has centered around the stock bubbles (miniature though they are) which have been inflated by the Fed’s massive liquidity injections into the market. The suspension of mark-to-market accounting has allowed the largest financial institutions to avoid writing down their actual losses. On top of that they have been given an enormous amount of capital from the Fed and Treasury. Much of this capital has not been put into stocks, but enough has been invested to make the S & P surge as if it were the 1990’s.

Meanwhile, the enormous amount of debt taken on by the US and UK has led to doubts over their AAA credit ratings. The UK was recently downgraded by Standard & Poor from “stable” to “negative,” though their AAA credit rating will stand until their debt reaches 100% of GDP (not far from now). At the current rate of debt accumulation, assuming there are no more huge bailouts revolving around commercial real estate or credit cards in the near future, the US debt level will reach 100% in 5 years. The results of a downgrade of the US credit rating (or even the UK for that matter) would lead to a catastrophic systemic crisis, massive capital flight from the US and general political mayhem would ensue.

This is why the Federal Reserve is buying up Treasury bonds–effectively printing money. However, in recent weeks the dollar has taken a sharp hit against other competing currencies–including the beleaguered British pound–as Treasury yields have skyrocketed. The cost of insuring US government debt is going up: as this occurs, we can expect some serious balance of payment problems for the US government. . . and by extension every financial institution in the world.

Effectively every major financial institution and thus every major corporation on the planet went bust last September and October, but the consequences of this crash were held back by the hugh bailouts by the Treasury and Federal Reserve. This policy cannot last for long and there is effectively no way to deal with this hugh debt overhang. At some point we will feel these losses. Even if the US used the crash of the dollar as a way to increase exports, no other foreign market has the capital necessary to purchase American goods (assuming we can rapidly build up our industrial base again to make anything in the first place) . . . and even if they did, the standard of living across the country would still plummet to 1980’s levels (at best).

In short, there is no recovery, nor can there be unless the huge debt overhang is confronted directly. Sooner or later, mark-to-market or not, these debts will have to be paid–and if they cannot, there will be defaults, which will result in massive stock market gyrations and the collapse of stocks worldwide (again). On top of this, the cost of the bailouts globally has pushed the bond markets into a state of collapse as well. We can expect capital flight into commodities like metals, food staples, and energy, resulting in hyperinflation that will destroy the buying power of what is left of the middle-classes (not to mention general privation for the working-classes and the chronically unemployed).

There will be no recovery anytime soon. The normal boom/bust cycle of capitalism spirals into Depressions when there is a massive expansion of credit to raise the profit rate. . . when these credit bubbles pop, there is no easy way out. We have seen two large Depressions before and we are merely on the cusp of the next one. It is up to us to wake up to our situation and demand massive reform . . . and from there we must build truly revolutionary political organizations that are international in scope t0 challenge this decadent social system that puts us through these unnecessary and potentially civilization-ending crises.

On April 27, 2009 AP reported that Israeli’s were offended over the naming of the recent flu outbreak “swine flu” and demanded it be called “Mexican Flu”.

While it may be true that the outbreak came from Mexico, it did not start with a Mexican, and I doubt any Jew who has kept up, at least somewhat, with current events will forget that it all started with a pig.

The next day Mexican officials voiced their offense over Israel renaming it “Mexican Flu”, however Israel said it has no intention of changing the name.

It seems as the mainstream media has since started referring to the flu as H1N1…so much for sensitivity.

Today marks the release of the new Conor Oberst and The Mystic Valley Band album called The Outer South. This is Conor’s second release with the Mystic Valley Band and it is a great sophomore album. It has a thick rock ‘n roll sound and a tinge of “country”. (No worries…the “country” that Nashville no longer represents.) The album also contains 7 tracks written and performed by various members of the Mystic Valley Band…all worthy of repeated listens. 

Here’s a past performance on Conan O’Brien show playing the song “Nikorette”

The current rhetoric about a swift “recovery” to the current economic crisis is just that: rhetoric. Not only rhetoric, but the rhetoric of a ruling class that is swiftly sailing towards perdition. Some things to keep in mind:

The Federal Reserve has purchased hundreds of billions of dollars of Treasuries with printed dollars and has effectively increased the money supply by 22% in order to prevent the current dis-inflation from turning into full-blown deflation. Any rebound in economic activity would quickly result in an explosion of hyperinflation–and at the current rate at which Japan, the UK, Switzerland, and the US are printing, we are not far from a collapse of the global currency system.

China is the only country in the world that has implemented a serious economic stimulus package: over a trillion dollars has been pumped into infrastructure, rural communities, and other job creation programs. Simultaneously the Chinese Communist Party leadership has put forward a large effort at expanding internal demand. Consequently, China will soon begin to remove the artificial barriers which weaken its currency (intentionally in order to help make cheap exports). As the yuan rises, more foreign capital will flow into Chinese coffers and there will likely be a rapid bought of commodities speculation as price controls are lifted in China. This capital will leave the US, Japan, and Western Europe for the relative safety of the new Chinese internal market. Over time, this would result in a flight from US Treasury bonds and equities as foreign donors (including China) liquidate those useless assets in favor of commodities and the prospect of a new reserve currency rising on the back of a basket of Asian currencies and possibly the Euro (assuming there is not a rapid turn to the printing press by the EU).

Nothing has changed. We are still losing 700,000 jobs a month in the US. Industrial capacity is at 70%, the lowest level since records were taken. Industrial output plunged 20% year on year, the largest drop since after World War II, during the decomissioning of the larget military project. Credit card delinquencies are on the rise and the securities constructed out of these will have to be written down–but not until the government buys them.

As the US government takes more losses, it will have to print more dollars to buy its Treasury bonds, at a certain point this devaluation will compel foreign holders like China, Japan, the United Arab Emirates, etc. to dump those bonds for more profitable equities in Asia, or at least for commodities which will have true value even if the currency system is torn completely to shreds. The US government will pay these debts out with more printed money, but this time there will be no goods and services to cover the gap between what is printed and what is actual. The result will be waves of inflation, rapid gyrations up and down that will eventually lead to a runaway collapse of the dollar and a level of capital flight we have never seen before.

The wave of foreclosures, job losses, and general deprivation that will follow will be completely off the charts. Unemployment will likely sore about 30% and on to the 40’s and 50’s, if not higher, unless the government finds some way to employ people en masse in spite of its bankrupt status. Entire towns and cities will go under at an unsustainable pace. Theft and looting will be rampant, resulting in more police (and National Guard) violence. Radical labor activity will become commonplace for those lucky enough to remain employed. Trucking companies will all go bust and so the supermarket shelves will be sparse–even so, the commodities on those shelves will be unaffordable for most Americans.

America’s ruling class will pay its debts in the hyperinflated dollar but will scuttle away all their profits by turning them into foreign currencies, commodities, etc. overseas. The concentration of ownership in the US ruling class will grow to levels that make pre-revolutionary France seem egalitarian (as if that weren’t already the case). Widespread hunger will result. Vital services will be shut down: hospitals will close or not offer enough services, fire departments will decay, and disease will spread rapidly as our standard of living plummets. Drug related violence will sore; the most ruthless forms of prostitution (systematic sex slavery rings) will spread rapidly across the country. Violence between the have-nots will be propelled forward by ruling class demagogues. Race riots and anti-immigrant riots will spread, as will violence against women. Everything we’ve gained in the last century will be taken away into the night…but a Democrat will be President!

And he will be derided. The scale of the hatred against Bush will soon be unleashed against Obama, and it is up to revolutionary leadership to turn that anger away from hateful right-wing currents and to the left. We cannot accomplish this by retreating to sectarian cadres nor by shirking cadres for “movementism” or blindly voting with the Democrats. We must build revolutionary cadres across the nation and across the borders: solidarity is the only way forward.

Precarity abounds; what it tends to–perdition or redemption–depends largely on what we do.

As the financial crisis passes into a deep economic crisis, we are treated to the spectacle of uprisings across Eastern Europe. In Moldova, students have stormed the parliament and ransacked the buildings, protesting the Communist Party leadership’s election rigging. Thousands of Georgians have camped in the capital Tbilisi calling for the resignation of the US puppet Saakashvili. Other demonstrations have threatened the governments of Latvia and Lithuania; there are also the beginnings of mass mobilization in Ukraine (which is “the big one” in the region).

As countries go bankrupt, the International Monetary Fund swoops in like a vulture to bleed the weakened population. IMF bailout money is only allowed to be used for banks, and the conditions of receiving that money involve punishing the broader population. This class warfare strategy is particularly heinous: the financial system has drained the real economy by depressing wages, robbing pensions, and giving out predatory loans; as a consequence, a crisis of overproduction has set off a credit crisis in the financial markets which has led to a second round of serious damage to the real economy; and now, in order to plug the hold in finance, ordinary people in the real economy are being asked to make the greatest sacrifices. This is a perfect example of a Hegelian “bad infinity” or a case of “snake eats tail”: the downward pressure from one end drags down the other end; as a consequence, the other end is hit with a second round, leading to a downward spiral.

Budget battles across the globe are heating up in universities, municipalities, state governments, etc. The ultimate budget battle however is yet to be fought: once the US government crashes the international monetary system with its reckless attempts to restore liquidity (when the problem is a lack of effective demand), we will see the whole system seize up. What that will look like is uncertain: things could devolve rapidly into international conflict. Today the Moldovan government blames neighboring Romania for the student demonstrations…

Regardless, people are getting their first taste of ruling class blood. Like tigers pacing in our pen, the working-class is becoming more and more conscious of its captivity. In France, militant workers have held several CEOs and other assorted bosses hostage. An upsurge in militant worker activity (including factory occupations) is also taking place in Ukraine. We are headed for  some serious confrontations globally.

This has only just begun. We have to build revolutionary organization within broader movements for public housing, single-payer healthcare, environmental justice and more if we are to reproduce the kinds of actions which are taking place in Europe here in the United States.

It is time for militant stance.