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Findings & Forecasts 03/06/2013

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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.

Economy

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.

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2 Responses to “Findings & Forecasts 03/06/2013”

  1. Kent Welton says:

    Hi,
    Tech­noc­racy is a fancy word for Fas­cism –they’re not allowed to use the “F” word… but we can!

    Kent Welton,
    FascismUSA.com

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  2. John says:

    Agenda 21 here we come!

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