Yay, the economy still sucks – BUYBUYBUY!!!
That was the word from soon to be Fed Chief, Janet Yellen, who promised MORE FREE MONEY for as far as the eye can see. To punctuate Yellen's concerns, we had a whopping -$41.8Bn Trade Deficit, Productivity declining from 2.3% to 1.8% while Unit Labor Costs fell twice as fast as expected (0.6%) indicating, once again, that no one is getting paid in America except the Capitalists, who own the means of production.
As Marx teaches us, what a worker produces always has two sorts of value in it. The first sort is the value in the tools, equipment, and raw materials used up in production of the output. That value passes over into the value of the output much as the physical components of those used up materials do. For example, 100 units of value in hammers, nails, wood, and glue pass over as 100 units of value in the output of chairs made with those inputs.
The second sort of value in the output – chairs in this example – is the value added by the labor of the worker, lets say 100 units as well. The chairs are then worth 200 units of value. The worker might typically be paid, say, 50 units of value as his/her wage. This means that the Capitalist, once the chairs have been sold at their value of 200, keeps for himself 150 units of value while paying the worker wages of 50 units.
Out of the 150 units of value the Capitalist receives, he spends 100 units to replenish the tools, equipment, and raw materials used up in production and keeps 50 units of value as the Capitalist's realized surplus: the fruits of Capitalist exploitation. He then uses that 50 to buy more tools, equipment and raw materials to expand his business. Notice that the tools, equipment and raw materials accumulated by the Capitalist ARE NOT the FRUITS of HIS labor but rather the surplus product of other workers' labor.
Exploitation is what transforms means of production – made by workers – into the property of Capitalists. To then reward Capitalists for what "they contribute" to production nicely hides the fact that what they contribute to production they first stole from the workers who produced those means of production. That is what Marx meant by saying Capitalism is a system in which the exploitation of workers in the past enables the exploitation of other workers in the present.
What we have developed in this country, and what Yellen is now perpetuating on steriods, is the endless accumulation of that excess production to the ruling class who, through automation, give less and less back to the workers and keep more and more for themselves.
We reward this behavior in many ways, including our Nation's steadfast refusal to tax these excess accumulations of wealth and now we have low-interest policies that make it pointless for workers to save, meaning they have to work more of their lives, creating a surplus of labor and further lowering their ability to demand fair wages for their contributions.
The sickest part of the chart above, that shows how what just 13 years ago was essentially a 50/50 split is now split 52/44 in favor of the Capitalists, is that the real Capitalists, the Top 5%, are INCLUDED in those wages – as they pay themselves quite a fat amount of money to generate the profits for the Corporations they own. When you break the top 5% out of the Wage Profile, you can see that the wages for the ENTIRE bottom 95% of the US population have gone downhill for over 3 decades (see The Ronnie Horror Picture Show and Part 2).
Despite the preaching of Ayn Rand, this is not the road to Utopia for our nation – it is ultimately the road to ruin! Even Rand herself said:
It only stands to reason that where there's sacrifice, there's someone collecting the sacrificial offerings. Where there's service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.
Well, our Corporate Masters are firmly in control now and they even had their Republican lackeys in line yesterday, passing Yellen through with the kind of soft-ball questions they usually reserve for Conservative Judges, because Yellen butters their bread on the right side – on both sides for that matter – and then she gives them more bread – and more butter – and nutella! This is all great until all this free money clogs up the economic arteries and we have a National Heart Attack but, until then, more nutella please!
Both our debt and the money supply that allows it are completely out of control and, the more we borrow, the lower rates go to keep a lid on the interest payments because, at $17,000,000,000,000, each 1% costs us $170Bn per year in interest alone. What were the interest rates in the early 80s? 15%. Did the Government WANT interest rates to be 15% or did it just happen? Well, it better not happen again because 15% of $17Tn is $2.55Tn a year in interest alone – that's more money than the total we collected in taxes last year!
That means, at 15%, we wouldn't be defaulting by choice – our debt service would simply be more money than we could possibly afford to pay. It can happen very, very fast and, obviously, even a return to 6% would cost us $1Tn a year and, if we don't pay it, then our debt is $18Tn, then $19Tn then $20Tn and 6% becomes $1.2Tn, etc. This is why we need to keep our heads firmly in the sand as we BUYBUYBUY equities for the long run because, in the long run (as Keynes said), we are all most certainly dead!
So, either we continue to move along at 0% interest and a nation of wage slaves continues to see their share of their labor erode as the top 1% accumulate the rest of the wealth of this nation or we're all doomed. There is a door number 3 and it reamains our only viable option – INFLATION. As I first proposed in "Inflation Nation" back in 2006, only a massive expansion of our economic base is going to take us off our doomsday path to a debt implosion down the road but, as the last 7 years of ZIRP have proven – we can't get there by making the top 1% richer – we have to start distributing those wages before it's too late.
Have a great weekend,
– Phil
