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Sean Corrigan: Consequences

Consequences


By Sean Corrigan
http://www.capital-insight.com
Thursday, 01 May 2003

"Wherefore, if on account of their allies, though they themselves had not been roused by any injuries, your ancestors waged war against Antiochus, against Philip, against the Aetolians, and against the Carthaginians; with how much earnestness ought you, when you yourselves have been provoked by injurious treatment, to defend the safety of the allies, and at the same time, the dignity of your empire? Especially when your greatest revenues are at stake. For the revenues of the other provinces, O Romans, are such that we can scarcely derive enough from them for the protection of the provinces themselves. But Asia is so rich and so productive, that in the fertility of its soil, and in the variety of its fruits, and in the vastness of its pasture lands, and in the multitude of all those things which are matters of exportation."

- SPEECH IN DEFENCE OF THE PROPOSED MANILIAN LAW by Marcus Tullius Cicero, 67BC

"The U.S. is trying to push he dollar lower against the Euro to narrow its trade deficit and retaliate against Germany and France for their opposition to the Iraq war, German magazine Der Spiegel said. `This will be Europe's invisible contribution to our Iraq costs,' an unidentified U.S. official told European policy makers in Brussels, according to the magazine. The U.S. has given up its strong dollar policy, the official said."

- BLOOMBERG NEWS, 2003AD

Well, wouldn’t that be a turn up. Fancy the US turning its Weapon of Monetary Destruction – the Dollar – into the means by which Colin Powell’s dark mutterings about ‘consequences’ for the French would be rained upon the cowering Gallic poltroons.

This surely must have had the Enarques in the Quai d’Orsay spluttering in their aperitifs with contemptuous amusement, when this surfaced, for the successors of de Gaulle and Rueff surely appreciate, better than most, just how much the US manages to strip mine from the rest of the world by dint of the Dollar’s primacy in the world’s monetary arrangements.

Famously dubbed its ‘exorbitant privilege’ by the irascible general, the French -unless they succumb to a fatal fit of the mercantilist vapours - must be tempted to mirror Nixon’s egregious Treasury Secretary John Connolly’s scatological comment and cry ‘**** the Dollar!’

Do you suppose, too, that out in the Far East the Chinese are unaware that between them, the Japanese, Koreans and Taiwanese, they have accumulated an extra $240 billion in (mostly USD) foreign exchange reserves this past year – enough to cover the full manpower budget of $153 billion and also the total $91.4 billion of consumption and investment outlays on the Aircraft, Ships, Vehicles, Missiles, Electronics and Software, and miscellaneous ‘Others’ which appear in the formal BEA accounts for defence spending?

In other words, that the US military machine is largely financed by the sweat of Asian labourers who dutifully turn in their surplus earned dollars to the local central bank for exchange into nothing more than Yen, Yuan, Won and Taiwan Dollars, a goodly proportion of which they leave on deposit at the state-owned bank?

Now we don’t really expect the Neo-Con courtiers of the Great Khan to have much of a grasp of economics – they spend too much time being all eschatological for that – but perhaps one or two of the wannabe Classical scholars in their ranks might have remembered Cicero’s injunction in the speech quoted above that ‘unlimited money is the sinews of war.

While these monochrome strategists and economic illiterates might be relying on the pliant Fed’s ability to create just such unlimited volumes of money, they seem to have forgotten that its post-partum value is what counts – and the Neo-Cons might therefore want to reflect not only on how they might finance their Imperial fantasies, but on how popular the Great Khan will be next year, if the citizens are asked to go into the polling booths while suffering from a denial of all those lovely cheap consumer goods which gullible foreigners keep sending - in their 5-million excess container-load profusion each year to the four busiest East and West Coast ports alone - asking only for more costlessly-created dollars in return.

Given that he only has intellectual giants of the ilk of Larry Kudlow to advise him, Karl Rove might not yet have factored in that this process might indeed greatly hurt his boss’ chances of matching his Pappy by being elected to the White House, if, as is likely, a fall in the dollar feeds straight through into higher general prices for raw and intermediate products, as well as of final merchandise.

The party strategists might note that, in 2002, personal incomes underwent one of their slowest years of nominal growth for decades, according to new figures from the BEA – so, unless output and hence employment miraculously pick up alongside any such higher prices, the receipt of those salaries which remain will be taken in dollars falling in purchasing power abroad, as well as at home, and would not bode well for their candidate.

As the BEA tells us, the 2.8% growth in income last year was the slowest in over 30 years and, even then, a quarter of that paltry increase was composed simply of extra transfer payments (mainly because unemployment benefits doubled) and fully half of that actually earned was attributable solely to greater government – and especially military – spending on payrolls.

Among the lowlights contained in the report, NY state had its first net income fall since 1949 and nationwide per capita income growth fell below 2% for the first time since the Eisenhower recession of 1958.

Written in the ranking of contributions to earned income by industry, we have almost a textbook case of the shortening of the Cone of Production – in other words, a shift away from a rich, capital-intensive and highly productive division of labour, towards a poorer, more hand to mouth one, built on immediate gratification and heavy State exactions of private property.

From durable goods – with a minus 19% score, all the way through to Services +37% and Government, +51%, we can see bad news written through the data.

No.

Clearly this is not a time for those wishing to preserve, much less extend, the march toward the New American Century to be doing anything to weaken the nation’s currency or to draw attention to the present dysfunctional and degenerative arrangement of consumption and income and of assets and liabilities it has brought about at home.


Otherwise, there might be another passage from that same speech of Cicero’s speech with uncomfortable echoes of consequence to come.

"For we know that then, when many had lost large fortunes in Asia, all credit failed at Rome, from payments being hindered. For it is not possible for many men to lose their property and fortunes in one city, without drawing many along with them into the same vortex of disaster. But do you now preserve the republic from this misfortune; and believe me… this credit, and this state of the money-market which exists at Rome and in the forum, is bound up with, and is inseparable from, those fortunes which are invested in Asia.

Those fortunes cannot fall without credit here being undermined by the same blow, and perishing along with them. Consider, then, whether you ought to hesitate to apply yourselves with all zeal to that war, in which the glory of your name, the safety of your allies, your greatest revenues, and the fortunes of numbers of your citizens, will be protected at the same time as the republic."

- ENDS -

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