Category Archives: the Great Recession of 2007-09

Is the US facing the same problems as Third Century Rome?

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The world, but particularly the US, is entering a period of great uncertainty, as did Rome in the third century AD. There were external threats and internal instability. Inflation was destroying the internal fabric. The coinage was diluted of its precious metals, silver and gold. People lost faith in its institutions, its army and its emperors. Through such inflation, the people were getting poorer. The longevity of its emperors was very short after the assassination of the Emperor Alexander Severus in 235 AD  The Empire fragmented and was in danger of collapsing. Two external threats were ever present: the Tribes of Northern and Eastern Europe were pressing on the Empire and in the East, there were Persian threats. Three emperors lost wars with Persia, and one, Emperor Valerian, was even captured by the Persians in 260 AD through a ruse.

The 42nd Emperor Claudius Gothicus, (268-270), stabilized the frontiers by defeating the Alemani and the Goths, but unfortunately, died of some kind of infection.  The 51st Emperor Deocletian, (284-305), further strengthened the Empire by reducing inflation, further stabilizing the frontiers, and introducing tetrarchy to government. Tetrarchy is four person rule.  Deoclitian split the administration into a Western Empire centered in Rome, and an Eastern Empire centered in the future city of Constantinople to be founded by Emperor Constantine the Great in 330 AD. When the Western Empire fell in 476 AD, the Eastern Empire or Byzantine Empire lasted for almost one thousand years until Contantinople fell to the Turks in 1453.

Is the US in a similar situation? Possibly?  The US has been in decline since President Nixon defaulted on the gold obligation of 35 dollars for one ounce of gold. Nixon proclaimed it would be temporary, but almost 50 years later is still going. As a result inflation became rampant, Congress became generous and passed the law that allowed Americans to own gold again. President Roosevelt and Congress banned ownership of gold except in jewelry in 1933.

Economic conditions were deteriorating slowly. Inflation in the seventies, Reaganomics in the eighties, Clintonomics in the nineties, subprime mortgages and the tech bubble in the first decade of the new millennium and a severe bust in 2007-09 that nearly collapsed the entire system. Throughout this period, living standards for Americans were going down. The main culprits were debt, public and private, quality job losses, inflation, lack of affordable universal health care, expensive education, and foreign military interventions.

As I mentioned in my previous posts, the three pillars of paper, all based on debt, are keeping this system afloat, but just barely, and they are the dollar, the stock market, and the bond market. The Federal Reserve and the Treasury are keeping the system going by shunting new money into stocks and bonds creating conditions for a financial shock that is becoming inevitable. Zero interest rates and quantitative easing are propping up the system, but not curing it; it cannot be cured.

One could call the US economy a “mirage” because there has been no actual growth since the late 1960’s. The living standards of the people have been going down and down, but the lies and deceptions have been going up. One does not know whom to believe. In socio-economic terms, three economic classes have developed in the US: the owner class of 1%, the overseer class of 4-5%, and the Precariat class of around 95%. The Precariat Class is composed of all ethnic groups, religions, and races, but it is kept divided by the Ownership Class for its own interests. The Precariat is on the whole totally dispossessed, and they live from pay cheque to pay cheque, with the loan sharking firms eating them in between.

The present recovery after the almost system collapse 0f 2007-8, has been nothing but “a mirage”, a statistical “recovery” propped by a series of quantitative easings and zero interest rates. The ownership class and the overseer class are doing extremely well, but the precariat class is barely surviving.

In foreign policy, the US, a hegemonic power, has become a reactionary force in order to maintain its world wide empire based on dollar indebtedness and exploitation of the rest of the world. Through its policy in the Middle East, it has lost Iran and now may lose Turkey, two large countries dominating the key strategic areas of the Afro-Eurasia. It is true, the US has gained  eastern Europe through the European Union and NATO, but Europe itself has become unstable.

In the Middle East, some claim that the US and Israel have created ISIS and Al-Qaeda  to destroy Syria and Iraq in order to get to Iran, and take total control of the Middle East and its natural resources. If Turkey switches to Eurasia, and a compromise is reached between Syria and Turkey, the US will lose the Middle East. The next shoe to drop will be Saudi Arabia because of its disastrous war in Yemen, as well as internal dissension.

Never before in its history has the US faced such complex problems as a dying economy  reflected in dying cities, dilapidated infrastructure, poor but costly education and health care; city violence could be a precursor to a general revolt.

The world is waiting with bated breath the results of the US presidential elections, The precariat class is flocking to Mr. Trump for salvation and the ownership class is in a panic. How the elections will turn out nobody knows, but if there is a financial collapse Trump would win massively. In that case, it is quite likely that martial law would be proclaimed and the elections postponed. Only time will tell.

The velocity of money and the Baltic Dry Index.

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The world economy is dying. Powerful people of the world are in denial. They think they will be able to correct the situation, but the world economy cannot be saved. The two indicators of a dying economy are the velocity of money and the Baltic Dry Index.

Let us examine the velocity of money. The simple definition is the speed with which money circulates through the economy. The more dynamic the economy, the more optimistic people feel about jobs and economic security, the more they feel relaxed and the more likely they will spend, travel, feel good about the country, the government, the people, and themselves. Presently, the velocity of money is collapsing. Whatever money ordinary people earn and have they do not want to spend. Also, many, many people have no money to spend. The situation is very dire, but one would not know by watching the “evil vision”. On evil vision, attractive women in eternal spring dresses, and men in impeccable suits with or without neckties constantly proclaim prosperity. The only people enjoying prosperity are the less than one percent of the ownership class and about five to ten percent of the overseer class to which the stars of the evil vision belong. (Evil vision is TV.) There is so much discontent in the country that it threatens the stability of the country. The economy is getting worse. Just look the stock market and the high yield bond market!

Another measure of how bad the US and world economy are is the Baltic Dry Index. Just last week it dropped below four hundred. Before the “Great Recession” of 2007-09, it was registering in the several thousands. After the so called Great Recession ended, it recovered to almost 2000. Now, after seven years of recovery it dropped to below 400, in the year of 2016. Any intelligent person, non-brain washed, knows that there was no recovery. In one of my previous posts, I stated that economic recovery in the US is impossible, because the energy entering the US economic system is decreasing, while the energy needed to maintain its internal and external operations is increasing. The Reserve Status of the dollar in the world is enabling the US to maintain its operation internally and world wide as long the rest of the world is accepting the dollar. That ability to maintain its operations is based on debt. As long as the rest of the world accepts American debt there is no problem. But that is ending and that is the problem. When the dollar is rejected it will be kaput.

The Baltic Dry Index {BDI} is indicating that world trade is collapsing. Empty ships are being anchored in ports. Oil tankers, full of crude, are anchored. There are few buyers of crude. Some experts are telling it is going to get worse. Collapsing BDI is possibly signaling world wide depression. Decreasing velocity of money is indicating that the majority of people have no money to buy even basic necessities.  Why are 94,000,000 people not in the labour force? Why are 47,000,000 people on food stamps? Why are wages for the non overseer class stagnant and decreasing? Why is the infrastructure of this nation dilapidated? Up until 2016, there was plenty of money for Wall Street. Now the stock markets and the bond markets of the world are collapsing. It could be that the world is entering the Economic Black Plague State. Only time will tell.