The French are beside themselves over the central government’s efforts to reduce their free lunches. Sacre bleu! Sez the New York Times:
PARIS — Hundreds of flights were canceled, frantic drivers lined up for fuel and hundreds of thousands of people, young and old, took to the streets of Paris and other cities on Tuesday as protests over President Nicolas Sarkozy’s plans to change France’s pension system mounted in advance of a final parliamentary vote this week.
The protests came on the sixth day of national strikes or demonstrations since early September.
The disruptions have gained momentum since the first national protest on Sept. 7, and have been compounded by an eight-day strike at oil refineries and blockades of fuel depots, leaving motorists scrambling.
In central Paris, drivers lined up at gas stations hoping to fill their tanks before a two-week school vacation begins this weekend. Many waited for as long as an hour, creeping toward pumps in the hope that they were not yet empty of fuel. Some drivers from the suburbs said they had tried to fill up at other stations on their way into the city, but without success. At least one fifth of France’s 12,000 service stations have run out of some products.
But Mr. Sarkozy has shown no sign of abandoning his plan to raise the minimum retirement age to 62 from 60.
“The reform is essential and France is committed to it and will go ahead with it just as our German partners did,”
From 60 to 62, all this? Threatening the food supply of the wonderful, darling cars is certainly terrorism! It is not hard to see fashionable Parisians holding their Gauloises backward in their fingers flicking ashes on each other in fits of fiscal fury.
Pensions could be considered the ultimate form of free lunch for the benefit of workers: the Manichean ideal being working until you drop dead at some machine. The cry is, ‘Out with the pensions and in with the slave labor!’ The highly organized hommes petits are having none of this! That they would hold their automobiles hostage indicates they are to be taken seriously!
About 16 million Americans love the idea of being able to work until they dropped dead in front of a machine. For them there is a free snack – a short interval on unemployment – then penury or the underground economy. Americans are always showing the way into the future which is no free lunch and no work, either.
Vive la France!
With labor solidarity facing annihilation the economic issue is where final demand will come from?
American workers led the way into austerity beginning in the 1970s by sacrificing their collective bargaining power then their high wages and standard of living so that Chinese slave labor could profit a widening clique of both Chinese and US bosses. This saved American corporations from liquidation but only for a little while. Final demand is a harsh mistress who requires her own free lunch. Take away cash flows and she takes away your business! Who understands this? W. J. Mason @ Free Lunch New Deal 2.0:
A number of economists of the liberal Keynesian persuasion have been arguing recently that dollar devaluation is an important step in moving us back toward full employment. In principle, of course, a cheaper dollar should raise US exports and lower US imports. But what’s missing from many of these arguments is a concrete, quantitative analysis of how much a lower dollar would raise demand for American goods.
Mason points out that F/X rates have little effect on employment unless the shift is massive and from foreign imports over to domestic production. What domestic production?
Whether it is cheap plastic American goods or Spindletop petroleum, domestic output is non- existent to the degree that additional employment, free lunches or final demand can be added. We’ve burned through our capital of both resources and value- adding businesses. Shrinking availability of low- priced inputs has stranded large parts of the US economy. Repriced inputs have rendered free lunches around the world unaffordable luxuries. The brilliant Ayn Rand- ian business tycoons never considered an economy where input costs might be other than near- zero. It’s an oversight that has only begun to reverberate.
Before being branded as a liberal Keynesian – I support the idea of the government putting people to work and paying them for it. There are many tasks that need doing! Adding workers would also have the positive effect of increasing final demand. This runs counter to the Made in USA austerity which fires all ‘excess’ staff simply for the cruelty of doing so. Luncheon @ the monetary buffet is much more fashionable than labor. Consequent is the diminished standing of work itself within culture.
The deprecation of labor and the devaluation of work as central to development of character or personality has been the logical outcome of increased dependency on finance. This is both for the (fake) economic output as well as for ‘variations on the theme of finance’ being the bleeding- edge chic cultural form. At the center is the artiste who does little but count money and claim himself to be. The central theme of American post- workism has been the elevation of the scam to a high art form. The rationalization is since all art is fraud then all fraud – except for the most clumsy – is art..
At the same time the artiste’s money comes from somewhere, the more operatic the scheming and the more Ponzi- like the scheme itself the more fabulously ironic the whole endeavor is. Self- referential fraud is the highest level of post- modern cultural achievement.
We are sinners in the hands of an angry Warholian God; desperate for our fifteen seconds of whatever it is we are supposed to get out of life. Succeed or fail we transform ourselves into outlaws: that transformation being the central myth of American pop culture. Instead of becoming real outlaws we become drag queen versions of Thelma and Louise – fake outlaws following the real course of events over the edge of various cliffs, hanging in midair for a minute or two like that other pop- culture icon Wile E. Coyote.
Outlaw = Free Lunch.
Beep Beep! Nobody talks about opportunity costs of outlawry. The polarity of outlawry in America is Angelo Mozilo on one hand and any number of non- artistic artists on the other. Bereft of ‘reputation’ of a kind he never possessed and a small percentage of a vast fortune Mozilo is personification of crime succeeding and by context work being the enterprise of suckers. Mozilo walks and his clients at all levels are destroyed.
The non- artists are simply shills peddling whatever con- game the establishment needs to have a ‘hip’ or ‘trendy’ front for. Behind the facade the pillaging takes place with the free lunches distributed to culturally certified ‘winners’ while those with mastery of anything mill aimlessly in unemployment lines.
Worst are the white- man manufactured ‘gangster rappers’ pimping corporate America’s consumption symbols; Cadillac Escalades and gargantuan McMansions. All is complete in this perversion of Ol’ Bama save the tall white columns and little shacks out back where the ‘Niewe Massas’ feel free to exercise their arms flogging their slaves when they are bored with kicking their dogs and beating their wives. More effective anti- negro propaganda could not be better contrived by the Ku Klux Klan itself!
The free lunch is a desperate and dirty trick in pitiless America but graven in stone in France, Germany, Spain, Italy, where the welfare state was born and perfected as an alternative to spiraling extremism and the resulting savage warfare. Without work there are no surpluses, without surpluses to manage free lunches vanish. What is unaffordable is not afforded. What remains in the black hole of worklessness are the cultural reverberations:
Public Union Parasites Move To Bar California Bankruptcies
Outrageously overpaid California public union parasites have every intention of sucking the last drop of blood out every taxpayer.
Regardless of the cost to taxpayers, and even though their bloated benefit programs vastly exceed what the private sector gets, nothing will get in the union’s way of protecting the overgenerous benefits they have, while still demanding more money from taxpayers, no matter what fiscal shape any of the cities are in because of those contracts.
Given that one cannot negotiate with parasites, mosquitoes, termites or other pestilence, the only reasonable solution is to exterminate them. Public unions need to be made illegal, and every service imaginable immediately outsourced to non-union shops.
Municipalities and States are in the same situation US businesses were 10 years ago, China bailed out teetering corporations by importing high wage American jobs. This was a Faustian bargain. With the jobs went final demand and a wage- rate surplus that is now America’s current account headache along with a dollar surplus that is China’s.
Now, America cannot export teachers or firefighters to Shanghai. We accommodate them or do without. What is left for our parasites and mosquitoes? Pension plunging in F/X and finance markets. The last buffet is the carry trade. Here Michael Hudson rants about finance’s free lunch:
“Coming events cast their shadows forward.” – Goethe
What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale, in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost?
It’s an interesting idea; any stocks and bonds traded in such manner would be as worthless as the instantly created ‘money’. Money is not a number, it is a proxy for something else. If that thing is production, what production would be represented by ‘keyboard cash’? If it is oil, would anyone trade oil for all the stocks and bonds in the world? Could Parisians run their wondrous, deliriously desirable Peugeots and Renaults on BAC or APPL? Would they want to? Unlike the carz, stocks are a trade, not a way of life:
It’s not finance trades that are doing in our way of life, it is our way of life which is doing in our way of life. Sez Hudson:
U.S. officials demonize foreign countries as aggressive “currency manipulators” for keeping their currencies weak. But these countries simply are trying to protect their currencies from arbitrageurs and speculators flooding their financial markets with dollars. Foreign central banks must choose between passively letting these inflows push up their exchange rates – thereby pricing their exports out of global markets – or recycling these inflows into U.S. Treasury bills yielding only 1% and whose exchange value is declining. (Longer-term bonds risk a domestic dollar-price decline if U.S interest rates should rise.)
The euphemism for flooding economies with credit is “quantitative easing.” The Federal Reserve is pumping liquidity and reserves into the financial system to reduce interest rates, ostensibly to enable banks to “earn their way” out of negative equity resulting from the bad loans made during the real estate bubble. This liquidity is spilling over to foreign economies, increasing their exchange rates. Joseph Stiglitz recently acknowledged that instead of helping the global recovery, the “flood of liquidity” from the Fed and the European Central Bank is causing “chaos” in foreign exchange markets. “The irony is that the Fed is creating all this liquidity with the hope that it will revive the American economy. … It’s doing nothing for the American economy, but it’s causing chaos over the rest of the world
Here’s where most are wrong including Hudson: QE hasn’t started yet! Version 1.0 ended last March. Outside of ‘normal’ open market operations (to support stock market prices in the US and elsewhere) there has been no extraordinary liquidity provisions by the Fed. Cheap liquidity right now is a euphemism for insignificant demand anywhere for credit.
What is there to buy with the credit that would offer a return? Nothing! No wonder it’s cheap and available?
Markets are the playgrounds of traders who have the means to move markets. This is as true in F/X as in the gold or stock markets. F/X has certainly made shifts of late, but this is nothing new. Markets,” said J.P.Morgan himself, “they will fluctuate.” Bernanke did not invent the declining dollar nor did human- pocket- protector Geithner do anything to drive its value lower against the euro, yen or any other currency. The Iron Law is still in effect – it’s a law, after all. The dollar does not depreciate due to expansion of American commerce. Depreciation is a market phenomenon. It’s traders run wild!
Finance can allocate credit and has done so, using presumed F/X gains as collateral: the ‘flood’ of credit exists only in the context of very low demand. The dollar carry trade is another Ponzi scheme. The only folks who will profit as Michael Hudson suggests are those who entered when the dollar was stronger and are closing their trades now, selling into ‘dollar trash talk’ hysteria.
Note that oil prices collapsed today as the high prices deterred purchasers as has been predicted in this blog over and over. Without cheap inputs there is no output and nothing to support the high prices or carry trade free lunches.
Rising costs of inputs has imposed an allocation regime on Western states’ social structures. Allocation places the Warholian ‘Fab Culture’ of non- work work and flip fashion in jeopardy at the same time the alternative of productive work is ground away by ruinous labor competition. Where does the non- work culture go from here? The economic answer is ‘nowhere’. It’s finished!
It is no surprise that industrial production is shrinking among developed nations as input costs rise. Only nations with cheap labor can afford to produce real goods and services and still keep them affordable to nations that cannot earn anything in any way other than by fashionable scams. At some point even cheap labor plus expensive fuel becomes too expensive and then what?
The only output remaining is returns on labor. The question is whether our perverse culture will allow it.