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The debt-slave rebellion! Get ready; it’s coming: the uprising of the popolo minuto, the revolt of the masses, the Jacquerie!
Bloomberg reports:
The Occupy Wall Street demonstrations that began last month in Lower Manhattan migrated uptown on Oct. 15, as about 6,000 people gathered in Times Square during what organizers called a “global day of action against Wall Street greed.” There were 92 arrests, according to the New York City Police Department. More than 100 people were injured in Rome, where as many as 200,000 amassed, the Corriere della Sera newspaper reported.
Chicago police arrested about 175 protesters in Grant Park around 1 a.m. local time yesterday after they refused to disperse, the Chicago Tribune reported. Eight were arrested in London a day earlier after demonstrators were barred from entering Paternoster Square, home to the London Stock Exchange. Six were charged, the Metropolitan Police said in a statement.
London protestors were camped out for a third day in front of St. Paul’s Cathedral near the financial district. Banners attached to the tents included signs reading “People Before Profit” and “The People are Too Big to Fail,” while protesters made speeches from the steps of the cathedral using megaphones.
Protesters and local politicians had gathered 300,000 signatures, flooded the city’s 311 information line and drew more than 3,000 people to the park to oppose the cleanup, according to Patrick Bruner, an Occupy Wall Street spokesman.
“The world will rise up as one and say, ‘We have had enough,’” Bruner said in an e-mail. A news release from the organization said there were demonstrations in 1,500 cities worldwide, including 100 in the U.S.
We read reports on the worldwide demonstrations in the Washington Post, Bloomberg and the Wall Street Journal. Nowhere was there the slightest hint at the real problem. Nobody’s interested in the real problem.
There are two aspects to humans, said the ancient Greeks. There is the “appetite” – which is the rational mind figuring out how to get what it wants. And there is the “spirit” – concerned with intangible things, like honour, status, religion and so forth.
It may be the appetite that builds wealth but it’s the spirit that fuels revolutions. People have an innate sense of what’s right and what’s wrong, what’s fair and what’s not fair. When they feel they are being cheated, they join the revolution.
The press talks about how the rich got richer. Here’s the Washington Post: "From 1973 through 1985, as Simon Johnson, former chief economist of the International Monetary Fund, documented in 2009, American banks never earned more than 16 percent of domestic corporate profits. By the mid-2000s, that figure rose to 41 percent. As with profits, so with pay: For more than three decades, from 1948 to 1982, pay levels in finance ranged from 99 to 108 percent of the average of private-sector pay. By 2007 they had reached 181 percent."
But why? How?
“Wall Street greed” is the reply given by both the protestors and the press. But wait. Wall Street was just as greedy back when it made 10% of corporate profits. Wall Street is always greedy. So is everyone else.
But it wasn’t Wall Street’s greed that tilted the world’s playing field in the direction of the rich. Nope. It was the feds. You’ve heard our explanation before. We’ll give it again below, but first let’s look at the news and at where this popular revolt might lead.
Friday, the Dow rose 166 points. In London, the FTSE was up 63. Stock market investors are ahead for the year. And look at this: oil is trading at $87 a barrel. And gold is moving up too. Is the correction in the gold market over? Looks like it.
How about stocks and oil? Are they going back up? Looks like it.
But who knows? According to our way of looking at things, they all should be going down. We’re in a period of de-leveraging, which is on the verge of tipping into a worldwide depression. This is not the time for oil, gold and stocks to be going up.
But Mr Market doesn’t listen to us. He doesn’t care what we think. He has plans of his own!
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And more thoughts
• Want to know how the rich got richer? Want to know how Wall Street made so much money?
We didn’t think so.
But we’ll tell you anyway. The post-1971 US dollar-based monetary system permitted an explosion of credit, with naturally favoured the credit industry directly, and the entire financial asset-holding investoriat, indirectly. All at the expense of the middle and lower classes. In other words, the expansion of credit, caused by a flexible, expandable money regime, set the whole economy ablaze. The middle and lower classes went deeply into debt to buy things. The “rich” – or at least those who owned stocks and bonds – got richer, as consumer spending lit up the business world, and particularly the financial industry itself. Profits from the financial industry were only about 10% of the total profits on Wall Street in 1970. By the time the credit bubble blew up in 2007 they had grown to 40%.
Wages for working stiffs were flat for 40 years. But earnings on Wall Street soared. In 1970, the typical salary in the financial industry was about the same as for equivalent positions in the rest of the economy. But, by the 21st century, Wall Street salaries were nearly twice as high.
People who complain about “greedy” executives and rich people miss the point. People – rich and poor – are always greedy. But they don’t always have a monetary system that encourages debt and favours investors over working people. This money system was created in 1971 by the Nixon Administration, which probably didn’t know what it was doing and it was later perfected by subsequent Federal Reserve chairmen.
In addition to stretching the gap between rich and poor it had one other notable consequence. It undermined the working classes’ ability to compete in the modern world. This it did by moving more and more production to the emerging markets. In pre-1971 days, nations had to settle up on their trade balances. That is, when one nation sold more to a neighbouring nation than it spent with it, the nation in surplus ended up with an excess of the neighbour’s currency. This surplus currency was then presented to the deficit country. The accounts were settled by transferring gold – the monetary system’s reserve at the time – from the deficit country to the surplus country.
As the gold left, it had a chilling effect on the deficit nation’s economy – either because investors caused interest rates to rise or because the central bank pushed them up. This resulted in slower economic growth and less spending, thereby correcting the outflow of funds to the neighbour.
It was precisely this self-correcting mechanism that the feds were determined to stop when the Nixon Administration “closed the gold window” at the Treasury department in August of 1971. The US had spent too much on the Vietnam War. French banks, which were still very active in Vietnam, tended to be the recipients of the money… which flowed to the Bank of France. The French, anticipating a problem with the dollar, wanted to exchange dollars for gold. This was the proximate cause of the Nixon Administration’s reaction – an actual default on its financial obligations. It was also the cause of the subsequent run up of the price of gold, which was followed by a bust in gold and thereafter a huge boom, in which ordinary Americans were lured into debt and coaxed towards poverty.
The rich got richer; the poor got poorer. The middle classes got poorer too. Between 1975 and 1992, the wealth of the richest 1% rose from 22% of total national household wealth to 42%. Why? Were the richest more productive? Had they become smarter? Of course, not. The playing field had been tilted in their direction!
• The ‘ciompi’ revolted in the 14th century. They were wool carders in Florence, the “popolo minuto” – the little people – without power or money. They rose up in June 1378, attacked government buildings and by July they were in control of the government.
But then, other trade groups got jealous. In August, the butchers attacked them at the Piazza della Signoria. After that, the power of the ciompi declined until things were back to normal.
This was just one of many uprisings of the lower orders in Europe. In France, a peasant named Jacques led a revolt against the authorities in the 14th century. That was just the beginning of a long list of uprisings – Jacqueries – that didn’t end until the 18th century.
• One of the most wrongheaded ideas of the entire 20th century came from Francis Fukuyama, who asked – apparently in earnest – if we had reached “The End of History?” He thought modern democracy and modern capitalism had reached such a point of perfection, after the fall of the Berlin Wall, that no improvement was possible. History had come to an end.
Jacqueries – he believed – were no longer necessary. Because modern democracy adapted naturally to the challenges it met. If the people had a grievance, all they had to do was to put in a call to their elected representatives. The politicians would discuss the matter and come to a solution, right?
Ha, ha, ha… Fukuyama misunderstood everything. Democracy. Capitalism. History. Politics. Everything. As an institution matures, little by little it shifts from serving its original purpose to serving the ends of those who control it. It becomes rigid – digging in its heels and resisting any change that would diminish the power and wealth of the controlling groups. The longer the institution remains unchanged, the more parasitic and arthritic it becomes. It drains resources away from honest production and redirects them towards favoured groups of leeches.
Then, history returns. Then cometh the revolution.
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