Technocracy in Europe
Technocracy is gaining further traction in Europe, and especially in Italy. Yesterday’s headline, “Italy president mulls new technocratic government” is a case in point. With the parliamentary government in gridlock, President Giorgio Napolitano is considering the outright appointment of a technocratic government.
You would think that the Italians had their fill of Technocracy when former President Mario Monti (Trilateral Commission) was appointed — not elected — to fix Italy’s economic problems. The first thing that Monti did was to appoint a 100 percent technocratic cabinet that included no politicians.
Italy is no better off under Monti’s technocrats and yet, as Monti transfers power to Napolitano, the moths continue to fly toward the flame.
Europe is not the first to explore Technocracy. The United States had a good taste of it under President John F. Kennedy. Michael Burleigh wrote in the Telegraph (UK) in 2011,
The Kennedy administration was the high point of technocrats colonizing government by invitation. Bright, “can-do”, forty-something whizz kids were recruited from academia and industry – the supreme example being Robert McNamara, the president of Ford Motor Corporation in Detroit. The fact that he had been co-responsible for one of the largest disasters in Ford’s history – the Edsel car, which lost $400 million and is still a synonym for commercial failure – was ignored.
Nothing was fully comprehensible to “Mac” unless expressed in mathematical terms. In this spirit, as secretary of defense, he set about modernizing South Vietnam in order to win a war he construed in terms of bomb tonnages dropped and body counts achieved. Contrary information simply did not compute as he set about installing electricity and a fridge in every peasant hut, unmindful of the fact that the Vietcong took over the village at night.
It is noteworthy that McNamara, like Monti today, was a principal member of the Trilateral Commission. The persistent attitude of “can do no wrong” that we saw then and again see today, is never reconciled with persistent failure. That something didn’t go the way they planned is not their fault, but rather the fault of countless others who didn’t perform or follow orders correctly.
With the DJIA reaching new all-time highs this week, the question must be asked if the economy is close behind. The evidence suggests not.
The above chart showed Real Retail Sales adjusted with ShadowStats.com Alternative CPI index, using 1990 as a base. It is still 23 percent below the 2000 peak, and barely off the bottom of the 2008 – 2009 Great Recession.
It’s no wonder that retail has not made a great comeback, considering that January saw the biggest decrease in personal income since 1993, falling 3.6 percent in a single month. Consumer spending makes up almost two-thirds of the U.S. economy, so less income ultimately means even less spending.
However, in the short term spending has actually increased. This is explained to a certain extent by the fact that the savings rate dropped from 6.4 percent in December to only 2.4 percent in January, meaning that people are using savings to stock up on consumer items.
There is a growing perception that real estate and stocks will recover together, bringing back the “good old days” seen prior to the 2008 crash. Housing and mortgage ads are running again on TV and radio. Direct mail is returning, offering all kinds of debt-related offers from cars to houses to appliances. Many consumers are taking the offers.
One must reason that anyone accepting food stamps from the government is experiencing financial distress. Since 2000, as the above chart shows, the number of recipients has skyrocketed, culminating 2012 with 47.7 million in the program; that is, 14.92 percent of the entire U.S. population. During Obama’s first four years, there were 11,133 new enrollees every day! In addition, the average monthly food-stamp benefit has risen almost 600 percent from $21 in 1975 to $132.96 in 2012.
In November 2012, Breitbart reported that the total number of food stamp recipients, “exceeds the combined populations of: Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
Wealth inequality in America continues to widen. The bottom 50 percent of our population own only 2.5 percent of our wealth. The wealthiest 1 percent have more combined wealth than the bottom 90 percent.
When considering the capital infrastructure of American manufacturing and service industries, it is noteworthy that durable goods orders fell by $9.6 billion or 2.0 percent in January. This is a significantly steeper loss than December 2012, which only declines by 1.3 percent.
So if the economy still stinks, why has the DJIA made it to new high ground? Answer: The Federal Reserve.
Quantitative Easing has put trillions of dollars into the financial system since 2008. Where has this money gone? First, it has been sucked up by big banks who have a propensity to hoard cash instead of putting it into circulation. Second, government spends money on everything from defense to highway equipment; this money almost always ends up being spent on contracts with global corporations, with little participation from smaller businesses.
New York Times reported in January that “If you’re trying to start a business today, you can almost forget about going to a bank for financing.” There has been very little trickle-down of actual money to the bottom of the economic food chain. Established businesses with a good credit are able to borrow, but generally have resisted borrowing even at low rates because their expectations for future expansion are slim to none.
The Fed has thus created a new bubble that promises to be the “mother of all bubbles” when it explodes. Remember that it was the Fed’s easy money policy that created the “dot-com” bubble in 2000. It was the same policy that created the housing bubble in 2008 – 9. It is the continued policy that is creating the equities bubble of 2013. Again, here is the progression: dot-com, housing, equities.
The fate of the equities bubble will be the same as the others — they will plunge, precipitating another financial crisis. As big banks burn capital, the Fed will again bail them out as before at the expense of the taxpayer and middle class. The hubris will push another large segment middle-class Americans into poverty.— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — – Note: Additional content on this page is available only to Premium subscribers of Findings & Forecasts.
To subscribe, please click here.