The Weiner Component #118A – Undermining the President

English: Seal of the President of the United S...

Never in moments of intense fantasizing could I conceive of anyone or any one group in Congress attempting to disrupt the President in foreign policy negotiations. For that matter neither could I visualize the Speaker of the House of Representatives inviting a foreign leader to address a joint session of Congress on a policy directly opposed to that of the President of the United States.

What we have here is a question of Why did these actions occur? What caused the Speaker and 47 out of the 54 Republican members of the Senate to act in this fashion, to go against the policies of the President, who constitutionally is our chief negotiator in dealing with foreign powers? And to do this in the midst of delegate negotiations without knowing anything specific about them except that they are at a critical point.

To what are all these Republicans really objecting? The probability is that if these negotiations fail there will eventually be war with Iran to keep Iran from developing an atomic bomb. If there is a war it will be far bloodier than that fought in Iraq. Iran has four times the population of Iraq and a well-developed military. None of these 47 Senators are or will be volunteering their children to serve in the military.

What strikes me, and does so very sadly, is that these people are basically reacting to their conscious or unconscious feelings about a Black man being President of the United States; they are reacting to their inner prejudices, probably to their feelings of superiority and/or inadequacy. They resent and, in some cases, hate the current President of the United States. They would actually prefer war to having the President achieve a diplomatic victory.  I would suspect that most of them aren’t even aware that these negotiations are not just between the United States and Iran but actually between Iran and the other four permanent members of the United Nations Security Council plus Germany. In point of fact most of the economic sanctions against Iran are being leveled by our allies or fellow negotiators.

The basic objective is to keep Iran from being able to build an atomic bomb.  If Iran were to have its own atomic bomb would she be able to use it? The answer to that is in the negative. If she were to threaten to use it against Israel then Israel could threaten to use a similar weapon against Iran. They would be able to totally destroy each other.

North Korea, which has a totally irrational government, has developed its own atomic bomb. This allows it to bluster a lot against its neighbors and run assorted missile tests into the ocean but there is no way it will use the bomb because it would be an act of suicide. North Korea has an atomic bomb but its enemies like the United States and Russia have much larger atomic weapons.  It would be like someone with a firecracker attacking someone with a stick of dynamite.

Iran, which is far less irrational than North Korea, would be even less inclined to use her weapon.  Also the major reason for the negotiations from Iran’s prospective is to end all the sanctions that have been applied against her, most of which have been placed by United States allies.

If Iran can come to terms with her enemies and openly trade with the rest of the world then the standard of living will rise significantly for all her citizens.  It is greatly to her advantage to become an equal member with all the other nations of the world.

She wants to be free to develop the use of atomic energy in her country.  A proper compromise would be to allow her to do this without her being able to produce enriched material that could be used in making a bomb.  And, at the same time, have the sanctions against her dropped.  Can this be done to everyone’s satisfaction?  That is what the negotiations are about.

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Under the staunch leadership of Tom Cotton of Arkansas, a junior senator, who has taken his seat in the Senate two whole months earlier, the GOP (Grand Old Party) sent a letter to the Ayatollah of Iran trying to undercut the international negotiating currently going on between Irans and P5+1.  This group consists of the five permanent members of the United Nations Security Council: the United States, Russia, China, United Kingdom, and France. The plus one is Germany.

When Tom Cotton was first interviewed after the announcement of sending the letter to the leaders in Iran he acted as though he had just discovered the wheel, the mechanism that would put him in charge of future dealings with Iran.  He seemed to have the impression he was ready to negotiate between both Republicans and Democrats for future outcomes with Iran.  Forty-six other Republican Senators signed the letter, the remaining seven did not

Whether he understood it or not this was an attempt to undermine the Constitutional powers of the President of the United States.  On the internet there is currently a petition to the President being organized, which currently has over 150,000 signatures, requesting that these 47 Senators be tried for treason.  The Republicans have made an international negotiation aimed at limiting Iran’s atomic ambitions into a political party partisan issue not only against the President of the United States but also against five of their allies.. The majority of Republican Senators have lined up with the Iranian hardliners who want no negotiations, interesting bedfellows.

Cotton and his fellow Republicans offer no alternative plan. Statements made indicate that they eventually expect complete capitulation by the Iranians.  The image of their ability that they have given to the rest of the world is pathetic.  In fact both liberal and conservative newspapers denounced their action in the harshest terms.

Imagine attempting to make an agreement with your enemy against the leader of your country. The Iranian leaders have denounced this as a propaganda attempt. The majority of the 47 Senators have come out with lame excuses for what they did.  Senator John McCain blamed it on a snowstorm and wanting to catch a plane out of Washington, D.C. Friday night before the storm struck. He didn’t have time to read the letter; he just signed it.  Others stated it was a joke and President Obama didn’t have a sense of humor by not seeing it.  President Obama said he was “embarrassed” for the Iran letter signers.

Tom Cotton sees nothing wrong with what he did.  For the first time in the history of the United States he has made negotiating with a foreign country a political partisan issue, something that was inconceivable the day before it happened.

If this is an example of Republican dominance in Congress, then God help us for the remaining two years until the next election. For there is no one else that can.

To site Will Rogers, the cowboy philosopher of the 1920s and 1930s, the children (Congress) were loose in the China Shop and they were all swinging their little hammers freely. Hopefully the destruction will not be too extensive.

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As a footnote it should also be remarked that there is an interesting level of irony occurring between the United States and Iran.  Both countries consider ISIS a threat to the Middle East and both countries are presently at war with ISIS.  The U.S. is conducting an air war continually bombing the ISIS military and facilities on the ground and Iran is involved in military ground operations against them.  The two countries are currently engaged separately on the same side in a war.

Currently the Iraqi military with Iranian forces and generals are fighting against the ISIS extremists in a hard fought battle to retake the city of Tikrit in the northwest section of the country, which they are expected to win, the first major victory against ISIS by Iraqi and it allies troops.

Interestingly, the article that stated this fact in the L.A. Times on Wednesday, March 12, 2015, made no mention of the Iranian participation; they just called them allied militiamen.  From what I understand most newspapers and TV commentators have made no mention of the Iranian military participating in this war.  For some strange reason this seems to complicate the War against ISIS.  It makes it an anomaly for most Republicans.  How can they accept Iran as an ally in the war against ISIS?

If we go back before the present government existed in Iran, when it was ruled by the Shah, then the U.S. was close allies with that country. We could move in that direction again.

If we think back to the Vietnam War, the longest war in U.S. history, which we eventually lost, then consider that today there is a Hanoi Hilton where Americans stay when visiting that country as tourists and the country, Vietnam, does advertise for tourists to visit their friendly shores.

Many of our enemies of yesterday are our friends of today, for example take one of our closest allies, the British, originally we went to war with them, twice.  The first one was called the American Revolution and the second The War of 1812.  Is this pattern of eventual friendship suddenly likely to change in this instance? After all we are allies with them in the fight against ISIS.

(Footnote: I’m averaging about 250 to 350 comments each day.  Among these I get numerous requests for information.

Official photographic portrait of US President...

Official photographic portrait of US President Barack Obama (born 4 August 1961; assumed office 20 January 2009) (Photo credit: Wikipedia)

Most of these are answered in The Weiner Component #114 – Responding to Your Enquires.)

 

 

 

 

The Weiner Component #103 – Is the United States Moving to Become an Autocracy?

U.S. Supreme Court building.

U.S. Supreme Court building. (Photo credit: Wikipedia)

For the last decade many articles have appeared in numerous newspapers and there have also been many comments made on TV about the disparity in salaries, increasing exponentially for the rich and wages being essentially static or barely going up for everyone else; that the economic upper class’s incomes have risen significantly while everyone one else’s have stayed largely frozen. This has been not just within the United States but also in the entire industrial world. If this continues throughout this century all these nations could end up at some point becoming autocracies with a small percentage of the population, the rich, ruling everyone else, and ruling them for their own benefit.

We could, in a sense, be going back in time to when the European states were ruled by autocrats, that is rule by the nobility. The nobility in the United States today are the very rich, the upper ten percent and the assorted companies and corporations that they control.

It is interesting to note that the United States in the post-Civil War period, from 1865 until the early 20th Century underwent a rapid industrial growth, essentially the Industrial Revolution. A number of small businessmen became multi-millionaires. This was the period of the “robber barons:” Rockefeller, Carnegie, Mellon, J.P. Morgan and many others; the so-called “400.” They had their hands in both the states and federal legislatures, freely using bribery, having or not having laws passed that benefited themselves. The Senate, which at that time was elected by the state legislatures, was considered a millionaire’s club, each major company, through bribery or otherwise, having its own man in that body. The U.S. was then largely ruled by the wealthy upper mercantile class for their own benefit.

What changed this was the Progressive Movement and the muckrakers. Initially there had been no laws regulating industry or urban growth. No regulations about employment of women and children, the length of the working day, safety rules at worksites, employer responsibility or sanitary or any other conditions in the rapidly growing cities. This was the time of the growth of urban centers from small towns to megalopolis.

The nation had gone from a rural country with relatively small cities to a society of giant urban areas and factories. Everything by the owners of industry was aimed at profit, nothing else seemed to matter. Wages were low, hours were long for six days a week, women and children worked these hours and days, slums abounded in these new cities, in many cases sanitary conditions were non-existent, and overall misery and disease abounded, particularly in summer seasons.

Gradually over several decades, up until World War I, laws and regulations were gradually passed regulating slum conditions, factory employment, and food production. The many monopolies and oligopolies were mostly broken up and became regulated by the government. Autocratic control by the wealthy became limited. The Constitution was amended and the Senate became elected directly by the voters.

It should be noted the every single health and safety law was passed because of abuses. The ages and hours for working children and women became limited, safety rules were introduced into both the factories and slum housing making the owners responsible for mishaps, and working hours became eventually limited to 40 and days to five. The list goes on and on.

By 1914 the United States had become mostly an urban nation. We had a small upper class, a growing middle class and a large lower class. The upper class, the autocrats still exercised a large amount of influence in the running of the country.

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Today we are again in a period of autocratic growth with the wealthy getting richer and everyone else’s income being frozen or shrinking in the face of a very slow inflation. For the last decade or more compensation for executives and successful entrepreneurs have at least doubled or trebled while wages for middle class workers have remained static or shrunk. For the lower class, essentially unskilled worker the minimum wage has remained at $7.25 an hour for the last seven years. CEO’s salaries are in the millions while at the bottom of the economic scale a worker takes home $290 before withholdings.

Inflation has generally been below 2%; but over a decade that is well over a 10% increase in the cost of living. The result is that even though most people are earning as much or slightly more than they did earlier the money is buying a lot less. It cost considerably more to live in terms of food, housing, and transportation. This has actually caused a slowing down of the GDP. People buy less because they have less.

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While people like the Koch Brothers of Kansas, whose holdings mostly in the oil industry is over 41 billion dollars each, spend well over 200 million dollars a year on causes enhancing their businesses and their far-right beliefs. They are just two of a host of billionaires or corporations that are spending billions each year to sensitize the public to their largely self-interested causes.

Through the use of money the billionaires and their Republican allies by limiting the voting franchise, particularly to Blacks, Latinos, college students, and other minorities in states where the Republicans control the governorship and legislatures they have been able to successfully espouse their agendas.

In Texas for the 2014 Midterm Election the Republican legislature and the Republican governor have been able to require certain types of identification that many registered poor Blacks and Hispanics do not have. There is a cost to getting these IDs which according to a Supreme Court Justice is tantamount to paying a pole tax in order to vote. This excluded over 500,000 registered Democrats, about six percent of the voting population, from being able to cast their ballot in the November Midterm Election.

The candidates to the governorships and state and federal legislatures need endless amounts of money to both run their campaigns and stay in office. It is in this fashion that the wealthy gain and maintain control of the government. The Koch Brothers, for example, who control oil pipe lines, oil refining, and oil wells, have themselves and through legislators they have funded and control, attempted to get laws passed making use of the green energies illegal. They seem to see the nation as existing for their benefit.

It is into this milieu that the wealthy have and are gaining more and more control over Congress and the means of communication. Millions of dollars are coming into important state elections which strongly help determine who the governors and senators will be, what initiatives and referendums will pass. The Republicans feel they will retain, with the current gerrymandering of electoral districts, control of the House of Representatives and that they will also gain control of the Senate by adding six additional Republican Senators. The origins of much of this out of state money does not have to be disclosed. This has happened.

What we are seeing is an ever-rising level of autocratic control of our government. What we are moving toward is a concept of: Even though all men are created equal, some Men are created ever more equal than the rest. This has been the result of the 2014 Midterm Election. Will it continue in 2016, the next Presidential Election?

English: First page of Constitution of the Uni...

The Weiner Component #59 – The Chinese Dilemma/Conundrum

English: Third generation mobile phones (TD-SC...

HK Bank of China Tower 中銀大廈 (香港), designed by ...

HK Bank of China Tower 中銀大廈 (香港), designed by I. M. Pei (Photo credit: Wikipedia)

China Mobile

China is in an interesting quandary because the Chinese Communist Government, which is now an autocratic capitalist orientated socialist state that largely has control over all the elements of its society except the domestic money supply; that it has traditionally also controlled, but now watches endlessly increase.  Regardless of what the government does this keeps getting larger, creating an ever-growing inflationary spiral for which the government keeps finding fictional and other means to attempt to control.

Because of a very successful trade balance with innumerable other nations, more and more Yuans have come and continue to come   into the country.  Far more than the government would like to have present.  The problem with foreign trade is that it must be done in the currency of the country buying the products.  The Chinese government does not want these assorted currencies to be traded on the International Currency Exchange against its own money.  This action would raise the value of the Yuan significantly against all other currencies and also lower the rates of the other foreign exchanges.  Therefore the Chinese government has branches of the Bank of China in all her major trading nations that exchanges the various currencies into Yuans, which, in turn, return to China, forever increasing the amount of cash available in that country.  It also gives the Chinese government endless amounts of the currencies of other nations that she has to invest in these trading nations, like, for example, the United States.  There, among other investments, she has over a trillion dollars in U.S. Government securities.

The only way they can decrease this currency flow into China is to decrease the amount of foreign trade.  That action would lead to massive unemployment problems and a growing and continuing bad recession.  The government is, in essence, caught on the horns of a dilemma in which their current mode of operation is the only one that makes sense.  Therefore their domestic currency problem continues to grow.

The problem, here, is that China has about an 8% yearly growth of its GDP (Gross Domestic Product).  This keeps employment high and allows the people an ever-growing standard of living.  It also allows for continued National economic growth.  Because of this positive situation there is an ever-increasing growth of the domestic money supply, creating more money than there are goods and services available, which means that prices keep rising.

China keeps the value of her currency against those of other nations low on the international market, making her goods less expensive in other countries.  This practice gives her a great trade advantage.

In other countries, as we’ve seen, the Chinese have to sell their goods in the currencies of these nations.  The Bank of China has branches in most of the foreign nations that exchange the foreign currencies for Chinese money.  The profits, from this foreign trade, come back to China in Yuans or Chinese money, gradually increasing the amount of currency available in the home country.  This has been going on for a great number of years now bringing about a growing spiral of inflation which the government has attempted to control in interesting ways.

One of the first things the Chinese government did to lower the rate of inflation in their country was to take food items off the CPI (Consumer Price Index) that measures the rate of inflation.  With the cost of food off the CPI the official inflation level dropped significantly.  But promulgating a fiction does not solve a problem.  Next the government started and has continued to raise taxes but there are limits as to how much can be taken from the populace.

The government still had to lessen the amount of money in the National Cash Flow.  She did this by raising all sorts of taxes.  This, in turn, created a new problem.  These new or higher taxes mostly hit the average consumer.  They found their purchasing power significantly going down.  The entrepreneurs who had been and are carrying on most of the foreign trade have had their taxes raised the least; their profit margins keep going up.  Basically there has been and is a redistribution of the money supply in China with the upper percentage of the population’s incomes rising and everyone else’s shrinking.

I imagine the people of China are not too thrilled by any of this.  Not only has the cost of food continually gone up, but so has their taxes.  Their money buys less now than it did in an earlier year.  At some future point something substantial is going to have to be done to rebalance the costs of living or there will be all sorts of protests and problems.

If China is to maintain its 8% growth pattern and full employment the inflation will continue.  To what extent can the government keep up its current system of taxation before the people physically object?

There is another problem China is facing with all this foreign trade and that is what to do with all the foreign currencies that are being exchanged for the Yuan.  China is building up a store of different monies which she has to invest in the countries of their origin.  This also is a dilemma.  What can she do with all these monies?  She can, of course, open up her country to much more trade goods from all over the world.  But that would significantly change her trading balance.

Recently Apple negotiated with China’s leading wireless phone company, China Mobile, to make Apple I-phones readily available in China. China Mobile is the world’s largest mobile phone carrier with 763 million subscribers.  It is estimated that it will sell somewhere between 12 to 39 million I-phones in China.  In fact some experts have more than doubled that number of sales, while others have lowered it.

Smaller mobile phone companies have sold a relatively small number of earlier versions of the I-phone in China.  There are also several million black marker I-phones in existence there.  Both Apple and China Mobile began their sales of the 5C and 5S I-phones on January 17, 2014 in China and the United States. In the U.S. the 5C is selling for $739 and the 5S costs $871.

If China Mobile sells these units for an average of $800, then with these prices if we average 25 million units times the average price of $800, we get two trillion, one hundred million dollars.  It could be much more but it probably will not be less.  Suddenly the trade balance between China and the United States undergoes a dramatic change if favor of the U.S. and China has less U.S. currency.

The outcome of this would be a win, win, win, win situation for everyone involved.  China would benefit by having its inflation rate drop significantly, the U.S. would benefit by having its trade balance decrease favorably, the Chinese people would benefit by having their new toys that are more sophisticated than my desk top computer, and Apple would benefit by upping its profit balance significantly, and, of course, Apple shareholders will benefit by having the value of their shares and dividends rise.

In essence everyone involved in this process comes out ahead.  Is it a one-time transaction?  The answer is, No.  There will no doubt be an Apple 6 phone and an Apple 7 series and so on.

Will this solve China’s dilemma?  No necessarily; but it will help slow it down considerably.  It gives the Chinese government more time to come up with possible solutions to its inflation problem.  Can this occur?  Anything is possible with time.

 

 

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The Weiner Component #53 – My Book: Economics in the 21st Century

Forex Money for Exchange in Currency Bank

If you have enjoyed and/or found my articles useful there is a book that I have written that deals with all these subjects in much greater detail and depth.  It’s called Economics in the 21st Century.  The work was published in 2012 in Kindle and can be downloaded on either a Kindle or any computer for a small fee.  You go to Amazon.com, scroll to Kindle and follow the instructions for locating and downloading the book.

The work begins by examining the Real Estate Fiasco of 2008, its origins in the 1970s, its successful growth and insane collapse toward the end of 2008, thirty-eight years later.  It provides an analysis of what brought about the 2008 economic boom and crash, the results and scenarios for change.

The book looks at popular but misguided economic (values) beliefs and common misperceptions that arise from them.  It shows how Microeconomics – the so-called common sense economics – that deals with business functionality, local and state taxes, and household budgets is now perversely interpreted and used as the basis for entire societies to operate; that is the governments of the United States and Europe.  It explores how Macroeconomics, the way that nations should operate, has been overlooked and usually ignored.  The fact that governments largely control their money supply (the amount of money in circulation) because they can print currency as needed.  This look at economics from an historical perspective provides a broader and deeper comprehension of today’s crisis and gives possible scenarios for the future of this century.

The study examines the current economic ongoing recession in the United States, minutely investigates the 2008 Real Estate Debacle from its beginnings, tracing it from the 1970s to the present.  The work concludes that the monetary increases over the years were necessary for a growing economy but utilized faulty means for the needed monetary increases.

The book’s underlying premise is that the prosperity of the nation is based upon the amount of money in circulation and its distribution among the general population.  The bundling and sale of mortgages from the 1970s on massively increased the amount of currency in circulation without causing any real inflation.  The Real Estate Debacle at the end of 2008 significantly reduced that amount.  People had been using their homes as bank accounts, many constantly refinancing them.  With the sudden decrease in property values the country fell into a recession that could have easily become a depression far worse than 1929.  We should note that the bottom twenty percent of the population did not share in this prosperity.  They were renters and had no houses to use as bank accounts.

In 2008, when Barak Obama was elected President of the United States, he got in on a campaign that stressed “Change.”  But the economy had been so damaged by prior Administrations that most of the first two years were spent in recovery and in passing the Affordable Health Care Bill.  In the 2010 Midterm Election the Republicans were able to take control of a number of states.  Because it was a census year they gerrymandered those states in their favor.  Having also taken control of the House of Representatives they were able to maintain that control for two more years, even though the popular vote favored the Democrats by 1.4 million votes.  From 2011 on they passed no legislation that would favor any additional employment.  Actually they further exacerbated the problem of unemployment in the nation by shrinking necessary government employment and further limiting the money supply in circulation.  What has kept this country economically afloat has been the creative Monetary Policy of the Federal Reserve, adding 85 billion dollars to the economy every single month.  This has countered the restrictive actions of Congress but has not been enough to bring about full recovery.  We still have slightly over seven percent unemployment.

Historically the work examines other economic crises and their causes, particularly the Great Depression of 1929.  It shows how the National Cash Flow, the amount of money in circulation in the nation determines the level of prosperity or hardship in the country.  International trade and money are handled from totally different viewpoints than those traditionally taught and/or widely believed.  The reality of the National Debt is questioned and explored in terms of private and public debt.  Public Debt is held directly by the Federal Government and its agencies.  Private Debt is that held by outside entities such as individuals, companies, foreign nations such as China and Japan.

Can the Federal Government, which owns fifty percent or more of its own debt, owe itself?  The contradictions in our economic system are examined.

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The Weiner Component #38 – The National Debt

To most people the National Debt is an unimaginable amount, over sixteen trillion dollars

United States Capitol

that the United States Government or the taxpayers owe to foreign entities like China and Japan, whose interest payments alone will eventually bankrupt the nation.  This also seems to be the image projected by the Republicans in Congress.  It is total misinformation and nonsense, more mythical than real.

The initial debt was incurred during the Revolutionary War and under the Articles of Confederation.  With the exception of the year 1835, the United States has continually held a public debt since the Constitution went into effect on March 4, 1789. 

The National or Public Debt of the United States consists of two components.  The first is debt held by the public and the second is debt held by government accounts or intergovernmental debt.  Debt held by the public consists of Treasury securities held by investors outside the Federal Government.  These include individuals, corporations, foreign states like China and Japan, and local governments, both in and out of the United States.

Debt held by government accounts includes non-marketable Treasury securities held in accounts administered by the Federal Government that are owed to program beneficiaries such as the Social Security Trust Fund.  This account currently exceeds 2.7 trillion dollars.  Other large intergovernmental holders include the Federal Housing Administration, the Federal Savings and Loan Corporation’s Resolution Fund, and the Federal Hospital Insurance Trust Fund (Medicare).  Debts held by governmental accounts represent the cumulative surpluses, including interest earning of these accounts that have been invested in Treasury securities.  In 2012 there were at least two direct transfers of 89 billion dollars from the FED to the Treasury that were mostly interest paid on the National Debt.

By my estimate the Federal Government owns well over fifty percent of its own debt.  Dr. Ben Bernanke, the Chairman of the Federal Reserve, recently stated (May 2013) that the FED, which had monthly been investing 85 billion dollars in the National Debt for well over the last twelve months, 40 billion in re-buying government securities and 45 billion in purchasing mortgage paper, would increase or decrease the monthly amount according to the nation’s needs.  He indicated that this would depend upon whether or not Congress would utilize fiscal policy, which it has not done since 2011.

It is interesting to note that the deficit under President Obama, which increased when he took office in 2009 because of the economic disaster facing the nation, has been dropping significantly and could by 2015 reverse itself and generate a surplus as it did in President Clinton’s last year in office.

Up to the end of 2008 there seemed to be endless amounts of money available.  Banks were refinancing real estate at 125 percent of their appraised value and in the process creating endless amounts of money.  People were spending like there was no tomorrow.  All of this ended when the Real Estate Bubble burst.  Every dollar in circulation suddenly became a nickel.  Virtually overnight there wasn’t enough money available to meet the needs of the economy.  If Presidents Bush and Obama had not bailed out the banks the nation would have been in a far worse depression than that of 1929.  The government, under the guidance of President Obama saved the economy from total ruin.  This was done by bailing out the financial institutions that had brought about the crash and then by bailing out some core industries like the automobile companies.  Where did the money come from?  The government created it and gave the needing companies the financial backing to recover.

Foreign trade has been unequal; we buy far more than we sell to others.  The two foreign nations that hold large amounts of the National Debt are Japan and China; each holding about 1.1 trillion dollars worth. 

Keep in mind that each nation has its own currency that has value only within the boundaries of that nation.  While money can be exchanged internationally if the trading is totally out of balance/unequal, then an international exchange of currency following the laws of supply and demand, could drop the value of the money fifty or more percent causing the nation that has acquired it to take a substantial loss in its profits.  Actually the money becomes a prisoner in the country of the sale and has to be invested there.  The value of this to the country making the massive purchases is that it gets the goods it wants and in a slightly convoluted fashion retains the funds it has spent for these items.

Several decades ago Japanese businessmen purchased large amounts of real estate in the United States, particularly in Hawaii.  They actually bought high and ended up eventually having to sell much of it far below what they had originally paid.  While China is very adept at selling goods and services to the rest of the world she has problems with certain aspects of her economy.  On 2012 many thousands of pigs died, presumably from drinking polluted water.  China has the largest population in the world and has to be able to successfully feed them.  It seems that she is in the process of buying food-producing companies in other nations (June 2013).  She is currently in the process of buying Smithfield Foods, the largest producer of pork in the U.S., for 4.7 plus billion dollars.  She is probably doing this also with countries other than the United States.  She will be importing what she needs from companies all over the world that she will own.

The Federal Government utilizes Macroeconomics.  Here money is the tool that it uses to allow the economy to function properly.  Ultimately the government prints/creates the money it needs to allow the economy to work.  It can do this knowingly or blindly.  The manner in which the state performs and controls the process determines the success of its economy.

On April 2, 2013, the National Debt was 16,805 trillion dollars.  What is the significance of this massive amount of money that the government has created?  Does this in any way hamper the productivity of the nation?  The answer to the first question is that there isn’t any real significance other than functionality.  The answer to the second question is NO.  It has become, as far as many of our conservative legislatures are concerned, the tail that is wagging the dog!  

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The Weiner Component #22-Vulture Capitalism

Mitt Romney surrounded by supporters during th...

While Mitt Romney was running for the presidency in 2012 his former company, Bain Capital, bought a steel company by gaining control of its stock.  Romney, from what I understand, had several million dollars invested in the acquisition.  In its last operating year in the United States the company made a profit of three hundred and something million dollars.  This meant that after paying all the compensation expenses from the executives to the janitors, that included 6.2 percent for social security, 1.4 percent for Medicare, medical insurance, retirement, plus any other costs associated with each employee, the company still made that profit.  There were about 169 employees involved in operating the company.

The executives at Bain Capital decided that it was more profitable to move the entire operation to China.  They would move the factory machinery there, reset up the plant, and use local labor to operate it, replacing all the American employees.  They brought Chinese workers to the United States to be trained by their American counterparts who they would be replacing when the factory was moved overseas.

Apparently the cost of a Chinese worker would be a fraction of what it cost to employ an American.  Even with the greater shipping distance the cost of the finished product would be one tenth or less of the cost of producing the item in America.  The yearly profit would be over three billion dollars a year, allowing for a massive return to the stockholders.  Mitt Romney’s few million dollars investment would be worth about ten times the amount he spent.

The people at the plant had appealed to Romney for help.  He had ignored them.  Obviously business is profit; the more profit the better the business.  The people employed are just a disposable tool when it comes to profit.

Bain Capital acted in a modern capitalistic manner, searching to maximize its profit.  They could earn much more using Chinese workers in China, where there is no social security, Medicare, or retirement, than by using American employees in the United States.

I’m not sure what happened to the steel company’s retirement fund.  Bain Capital could have looted it to pay for the transfer of the company to China and left the Federal Government with the responsibility to make good on it for their former employees.  They had done that type of thing before, more than once.

Bain Capital calls itself a Venture Capitalist Company, but they are actually Vulture Capitalists; like the bird they pick and devour the flesh and sinews off a living or dying creature, leaving only the lifeless bones behind.  They will take a successfully functioning company, sell off the parts, making millions in the process and leave unemployed workers and an empty structure behind or move a successfully functioning factory outside of the United States where there are far cheaper labor markets.

Is this all legal?  I would suspect it, more or less, is.  There may be some gray or very grey areas where the legality is highly questionable.  For example, some of these companies have looted long existing retirement funds leaving the Federal Government to pick up and fund the mess.  Bain Capital has, over the years, bought a number of companies and then added what it spent for the purchase to the company’s debt, turning a successfully operating business into a bankrupt concern.  There are probably a number of other ways to turn a quick profit employed by Bain and similar companies.

I would suspect there needs to be a thorough examination of the existing business laws leading to a thorough revision of the these statutes   Their purpose should not be to allow for many of the practices that now exist.

In the 1930s then Senator Harry S. Truman called these people “the wrecking crew.”  They existed then and pulled these practices during the Great Depression and they certainly exist today.

Mitt Romney during his presidential campaign called those people, part of whose employment he had done away with, part of “the 47% who expect a free economic ride.”  I see Romney and his like as the true economic leaches in this country.  They are the ones who have taken a free economic ride by exploiting a large percentage of the public and, in many cases, left the taxpayer, by way of the Federal Government, to pay to pay the bill.

 
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The Weiner Component #11 – Outsourcing & the Enigma of China

TAMPA, FL - AUGUST 27:  Protesters demonstrate...

Bain Capital, Apple, and other companies that manufacture their products in China do so for a very obvious reason, profit, and usually enormous profits.  In the U.S. a decent wage has to be paid, generally arranged by a union contract.  There are additional monies for social security, Medicare, unemployment insurance, pensions, medical insurance, etc.  The employee pays some of this, but the employer pays most of this sum.  A seventeen-dollar an hour job could end up costing the company from thirty to forty dollars an hour.  Even paying all this a successful concern can be making a good profit.

Modern Communist China is in an interesting condition.  An individual visiting that country today would find its large cities no different than those in other industrial nations.  The people in these cities are paid according to their occupation as in the West.  There are public transportation, parks, libraries, and schools.  These are modern urban centers, which in many instances look better than those in Europe or the United. States in that they are newer and generally better planned.

However if one visits the countryside, there an individual finds a totally different situation.  Factory communities have been set up in many places that employ, house, and feed large numbers of workers who labor in these buildings on twelve hour shifts under primitive conditions, poorly fed, and poorly housed in crowded accommodations.

These are the sweatshops of China into which many American and Western employers such as Mitt Romney have invested.  Historically the conditions in these plants mirror those in England, Europe, and later the United States during the early period of the Industrial Revolution.  Whole generations of people were sacrificed to the growing needs of early capitalism.  In England over a period of thirty or more years Parliament gradually passed legislation limiting the employment of women and children and bringing about reforms for everyone employed.  While the employers had no social conscience in this pure capitalistic system, the government did have one.  Eventually the labor or socialistic part became one of the major political parties in England.  Much of the same can be said for all the other industrial states.

Today the American and European entrepreneurs can have an immediate phenomenal cash advantage by shipping both their manufacturing and even their factories to the Chinese countryside.  Here all their labor costs are under one dollar an hour and there are no benefits or retirement for the workers.  For every million dollars in profit they made in the United States they would now be getting thirty to forty million dollars.  People like Mitt Romney, the former CEO of Bain Capital would be foolish to do otherwise.  After all their success is measured by the bottom line, the amount of profit they make for their company and for themselves.

Of course all of this is short term, immediate.  By the time this situation is straightened out in China at least a decade or two will have passed.  Mitt Romney will be seventy-five or eighty-five years of age and might even have gone to his reward.  It won’t be his problem anymore.  Bain Capital will still be around; but it will be run by a group of younger men.  They may be able to find another area of the world to exploit.  China will have benefited by having become the first among all the manufacturing countries in the world.  After all what are a few million lives to a country with a population of well over a billion people?

What I find innocuous is that China, a Communist Country, formally called The People’s Republic of China, is willing to exploit sections of their own population in the same fashion as the early industrial capitalists did in Nineteenth Century England.  At least in the British Isles the government worked to end the abuse.  In China it seems that the government is perpetuating it.  With or without the direct aid of the Chinese Communist Government these early capitalist practices will gradually change.

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