Old Overclasses Never Learn

As Chris Hedges noted yesterday, “[o]ur oligarchic class is incompetent at governing, managing the economy, coping with natural disasters, educating our young, handling foreign affairs, providing basic services like health care and safeguarding individual rights.”  And, I would add, that’s just the short list.

And, now that their system has spent its latest and greatest upswing phase, the overclass hasn’t got a clue what to do about the coming downswing.  As Hedges puts it, “the corporate managers and government officials trying to fix the economic meltdown are pouring money and resources into the financial sector because they only know how to manage and sustain established systems, not change them.”

Indeed, consider what Business Week calls “the next meltdown.”  That is the coming implosion of the securitized ocean of credit-card debt in the United States.  As Business Week explains, in the terminology of the times:

The troubles sound familiar. Borrowers falling behind on their payments. Defaults rising. Huge swaths of loans souring. Investors getting burned. But forget the now-familiar tales of mortgages gone bad. The next horror for beaten-down financial firms is…outstanding credit-card debt—much of it toxic.

That’s bad news for players like JPMorgan Chase (JPM) and Bank of America (BAC) that have largely sidestepped—and even benefited from—the mortgage mess but have major credit-card operations. They’re hardly alone. The consumer debt bomb is already beginning to spray shrapnel throughout the financial markets, further weakening the U.S. economy.

“The next meltdown will be in credit cards,” says Gregory Larkin, senior analyst at research firm Innovest Strategic Value Advisors. Adds William Black, senior vice-president of Moody’s Investors Service’s structured finance team: “We still haven’t hit the post-recessionary peaks [in credit-card losses], so things will get worse before they get better.” What’s more, the U.S. Treasury Dept.’s $700 billion mortgage bailout won’t be a lifeline for credit-card issuers.

But some banks and credit-card companies may be exacerbating their problems. To boost profits and get ahead of coming regulation, they’re hiking interest rates. But that’s making it harder for consumers to keep up. That’ll only make tomorrow’s pain worse. Innovest estimates that credit-card issuers will take a $41 billion hit from rotten debt this year and a $96 billion blow in 2009.

Those losses, in turn, will wend their way through the $365 billion market for securities backed by credit-card debt. As with mortgages, banks bundle groups of so-called credit-card receivables, essentially consumers’ outstanding balances, and sell them to big investors such as hedge funds and pension funds. Big issuers offload roughly 70% of their credit-card debt.

Making matters worse, the subprime threat is also greater in credit-card land. Risky borrowers with low credit scores account for roughly 30% of outstanding credit-card debt, compared with 11% of mortgage debt. More than 45% of Washington Mutual’s credit-card portfolio is subprime, according to Innovest. That could become a headache for JPMorgan Chase, which agreed on Sept. 25 to buy the troubled thrift’s credit-card business and other assets for $1.9 billion.

“Subprime,” of course, is the overclass label for all those who live in conditions below those enjoyed by the upper-middle-class and the overclass. What Business Week is trying to say is that the same problems that killed the housing gambit are about to devastate the long-running credit-card push.

And that figures, since it’s much easier to get a credit card than a mortgage, and, just as they did via the “home equity” delusion, the masters of the system have been enjoying the long-running substitution of credit cards for wage and salary increases among the peons. But people can’t not pay debts forever. That, in turn, means that credit cards can only compensate for class polarization for so long, even in the most aggressive, creative market-totalitarian conditions (a.k.a. “even in America”).

But the real lesson of the coming trouble is to realize that, despite the strong memories of the last Great Depression, the egregious even-more-of-the-same anti-solutions being fobbed off as “solutions” remain exactly the same as they were last time around: help the rich and wait for them to re-start the economy. After all, they’re entrepreneurs!

Want proof that that’s the going policy? Guess what the amount of outstanding credit-card debt is in the USA? $950 billion.

Hence, one massively obvious answer to the question of how to stimulate the economy was to aid its victims rather than its victimizers. And one massively obvious way to have done that would have been to pay off all the credit cards, instead of bailing out the Wall Street speculators.

But that idea was never, ever on the agenda. Naturally so, for history shows that established overclasses never, ever concede or learn or change, unless severely threatened with progressive overthrow.

As Hedges puts it:

Our elites—the ones in Congress, the ones on Wall Street and the ones being produced at prestigious universities and business schools—do not have the capacity to fix our financial mess. Indeed, they will make it worse. They have no concept, thanks to the educations they have received, of the common good. They are stunted, timid and uncreative bureaucrats who are trained to carry out systems management. They see only piecemeal solutions which will satisfy the corporate structure. They are about numbers, profits and personal advancement. They are as able to deny gravely ill people medical coverage to increase company profits as they are able to use taxpayer dollars to peddle costly weapons systems to blood-soaked dictatorships. The human consequences never figure into their balance sheets. The democratic system, they think, is a secondary product of the free market. And they slavishly serve the market.

We may elect representatives to Congress to end the war in Iraq, but the war goes on. We may plead with these representatives to halt Bush’s illegal wiretapping but the telecommunications lobbyists make sure it remains in place. We may beg them not to pass the bailout but 850 billion taxpayer dollars are funneled upward to the elites on Wall Street. We may want single-payer, not-for-profit health care but it is not even discussed as a possibility in presidential debates. We, as individuals in this system, are irrelevant.

[W]hat is coming, as long as our oligarchy remains in charge, will not be good. We will either recover the concept of the public good, and this means a revolt against our bankrupt elite and the dynamiting of the corporatist structure, or we will extinguish our democracy.

The Addicts Speak…

As I will explain in my forthcoming book, Automobiles Über Alles: Capitalism and Transportation in the United States, no topic is more forbidden to public utterance than corporate capitalists’ intractable collective addiction to selling cars.  Despite the increasingly obvious suicidal insanity of permitting this addiction to continue, even its mere existence still cannot be mentioned in public.

If you doubt this, check out the latest dog-and-pony show conducted in the U.S. Congress: the June 23, 2008 House Committee on Energy and Commerce hearing called “Energy Speculation: Is Greater Regulation Necessary to Stop Price Manipulation? – Part II.”

What did the two wings of the Business Party have to say in this bit of theater?

The R wing, mostly unabashed about its service to the overclass (major exception: its “social conservative” marketing operations targeting scared white commoners), admits “America [exactly what part of “America” we don’t say, of course] is addicted to oil” while seeking to lay hands on more of the substance of choice: “We” need to drill more and prod “our” allies, like the gang-rape-victim-jailing Saudi “royal” family, to pump us more of the good stuff.

Then we’ll be OK, we’ll be OK, we’ll be OK…


More interesting and, as always, much less honest is the D faction of the Business Party. What is its way of avoiding the Carmageddon issue on behalf of the choosing class?

Well, for starters, where would you guess, if the D Team really were an opposition party, the Chair of the House Committee on Energy and Commerce might come from? California? Seattle? Portland or Eugene, Oregon? Madison, Wisconsin? Or some other hotbed of ecology, right?

But from whence does the actually existing Energy Chair arise? Why, Detroit, of course!

And what does the Honorable Motor City representative have to say about why “America is addicted to oil”? It’s not really a problem of demand, of course:

The environmental community says the answer is to conserve energy, to change the way we live, work, and play.

Well, that’s:

a valid point.

But it isn’t any part of the business of Congress, since the structure of demand is just one of many:

long-term solutions that will likely take at least 10 years; they will do little to solve the immediate problem we face.

In reality, the urgent business of Congress, this fine D-bot Chair says, is not to raise the issue of why we’re addicts.  No, it is to start by observing:

The Saudis note that oil supply-and-demand seem to be in balance and that there is no substantive basis for current prices.

Got that? “There is no substantive basis for current prices” of petroleum!  We have no underlying problem!

So what is the trouble we face?

Even the Department of Energy’s own Energy Information Administration says that “the flow of investment money” has contributed to the spike in oil prices. Yet the Secretary of Energy dismisses speculation as a cause of spiking oil prices and the Treasury Secretary agrees, shrugging it off as a “tough period.” In short, real solutions from this Administration are harder to find than a $3 gallon of gas.

See? See? It’s just the dealers, man! They’re gouging us, man — totally harshing our buzz, man! We just need to get some new dealers, see!  Help us rough up our dealers, OK, man?

Then we’ll be OK, we’ll be OK, we’ll be OK…


Can you say “Carmageddon?”

A Thought for Cheap Gas Inhalers

We face a choice between radical transportation reform/urban reconstruction and Carmageddon.

For those who are tempted to inhale the smoke being blown about ignoring this choice and merely rallying ourselves to demand cheaper prices at the pump, here’s a thought:

It is far from clear that cheaper oil is even possible. Not all speculation is irrational. Even a nationalized energy industry would probably be buying and stockpiling oil now at high prices, based on the likelihood that future prices will be even higher, due to booming global demand and peaking supplies — neither of which even the most rational cheap gas organizers (like Ralph Nader) usually mention.

This is not the 1970s any more.  The trouble is much deeper this time.

A Dodge Indeed: “Gas Prices” or Carmageddon?

“America is addicted to oil,” but only because the world’s capitalist overclass is addicted to perpetuating the automobiles-über-alles transportation order of the United States.

To any rational observer of current events, this remarkable arrangement is now massively and multiply promising to become perhaps history’s greatest teacher of the lesson “Be careful what you ask for — you might get it.”

Always a capitalist’s wet dream, the reign of the private automobile was always basically inevitable in the United States, where the flux and flow of human and national histories gave corporate shareholders their clearest path to essentially unchecked power and an ensuing paradise of industrial-scale money-making. Contrary to mainstream dogma, ordinary people would never have spontaneously used democracy to demand the wildly expensive, destructive, and dangerous cars-first American situation. Only an overclass that thrives on waste and enjoys extremely deep political dominance could have called it forth, via Promethean assumptions and methods.

So, now that the wheels are undeniably starting to fall off, is the overclass likely to break the historical rule that entrenched elites never voluntarily give up their powers and privileges? Will the powers-that-be admit they fucked up, and start allowing discussion of their fuck-up?

You can judge the odds of that happening by pondering items such as Daimler-Chrysler’s latest avoidance tactic, the “$2.99 Gas Guarantee.”

You can expect no efforts to be spared to keep the impending arrival of Carmageddon to be labeled a problem of “gas prices,” “oil addiction,” “alternative fuels,” etc. — anything and everything but what it actually is: capitalism’s self-dug grave.

Squeezing Smithsonian

aerial view Few ever talk about it, but one of the cornerstones of the American way of unrestrained corporate capitalism is the intentional hamstringing, or even outright killing, of public enterprise. Think Amtrak, as compared with the SNCF and the Shinkansen.

Well, the same starvation strategy also applies to the Smithsonian Institution. As reported in this morning’s New York Times:

The new secretary has his work cut out for him. He inherits an institution that has been struggling with how to cover a $2.5 billion shortfall to pay for the maintenance of its buildings, many of which are in dire need of repair. Although the Smithsonian gets 70 percent of its $1 billion operating budget from the federal government, Congress has been pressuring the organization to raise more of its own money.

The nation’s foremost public museum system needs a one-time injection of $2.5 billion plus a stable $1 billion budget, but can’t get it? This, in a $14 trillion economy with $4 trillion of annual government spending.

What this means is not just further intentional starvation of the Smithsonian, but also the further commercialization of whatever activities it can manage to sustain. Where do you think Congress thinks the Smithsonian will have to turn to “raise more of its own money”? It won’t come from Joe and Jane Sixpack, that’s for sure.

This story also has a special connection to those interested in the effort to expose big business marketing for what it is. The Smithsonian’s National Museum of American History has an Archives Center. For a while, the Archives Center had money to collect actual documents and oral history interviews from those involved in planning and executing some major corporate marketing operations. That money and that program — the Center for Advertising History — expired over a decade ago, but the CAH collection nevertheless remains one of the very few places a member of the public can get a direct, comparatively unfiltered, first-hand look at the utterly coercive, dishonest, and dangerous big business marketing process.

Think the mega-corporations to whom Congress is selling the Smithsonian wouldn’t like to “lose” that little batch of stuff?

Sunk Costs: The Broken Iron Horse, Dead and Gone

a French tgv train engine In Europe and Japan, where they have spent and do spend a fraction of what we Americans have spent and do spend on transportation, they have fantastically fast, safe, pleasurable-to-ride, energy-efficient, and generally ever-improving modern railroads. We, of course, have the intentionally starved, dilapidated national embarrassment of Amtrak, plus the fantastically expensive, wasteful, and locally and geopolitically dangerous autos-über-alles system to which the iron horse was long ago sacrificed here.

Of course, another major marker of our overclass’s extreme hostility to sane transportation priorities is the airports-and-airplanes shuffle that (kind of) fills the gaps left by our scandalous lack of modern inter-city railroads. Like the dictated-from-above cars-first arrangement it (kind of) helps to patch up, that system is not only multiply and generally inferior to the rail systems they have built in Europe and Japan, but, being based on the burning of petroleum, is also under extra-severe stress these days.

It was in this light that James Howard Kunstler’s “Daily Grunt” caught my eye today. Here’s what Kunstler reports:

Death of the Airline Industry
I knew I was in trouble when I checked in and the Northwest departure board behind the ticket desk said the 5:39PM to Minneapolis was “delayed.” That’s when you know you’re in for an evening of, at least, being lied to and fucked around. Up at the gate, they let it be known that the 5:39 would now leave at 6:08. That was cool. I had a two-hour layover in the Twin Cities for my connection to Duluth. As it happened, though, they didn’t board us until 6:00. We pushed back at 6:30, taxied out to the runway, and then sat there for another hour. About halfway through that wait, the pilot got on the PA and said they were “waiting for their numbers.” A half hour later he came back on the PA and said the plane was “over its weight limit” and we had to go back to the gate and drop some people off. Huh…? This was a small regional jet. There were 12 rows of two across, and there were a few empty seats. So, we get back to the gate and we sit there for another half hour while a technician comes on board with a clipboard and palavers with the flight crew. It’s now two hours past the original schduled departure time. So even if we left that instant, I’d miss my connection to Duluth and be stuck in the Minneapolis airport all night. As it happened, the pilot asked for 13 volunteers to get off the plane. (There was some grumbling about the obvious illogic of a plane designed with 48 seats being unable to carry 36 passengers… but let’s not even go there….) If they couldn’t get 13 volunteers, the pilot said, they’d cancel the whole flight (and then everybody would be fucked, I inferred). I got up with a bunch of other volunteers — thirteen, finally — and straggled off the plane. We hung around the gate for another hour and half waiting to get re-booked for tomorrow, and to get our gate-checked luggage back. The most amazing thing about the whole misadventure is how dim the Northwest employees acted. From the flight crew to the gate agent, nobody really seemed to know what was going on or know what they were doing. I actually don’t know if the plane ever did leave. It was still parked at the gate when I finally left the airport at 9:30. By the time I got home it was 10:00 PM. I have to get up at 3:30AM to make a 6:00AM flight tomorrow. (Sigh….)