US WATCH: ECONOMY’S REAL VALUE

Erle Frayne  Argonza y Delago

 

Great and mighty is America’s economy! America can buy the whole earth and feed all the world’s people! Americans are the world’s wealthiest, they can buy any and all guys outside the borders!

 

What delusional arrogance from some demonic Pied Pipers! The USA’s GDP ended up at $12.5 Trillion last year, though some indicator massage could yield a higher figure of $13.5 Trillion (using Purchasing Power Parity or PPP). Measure this against the Gross World Product of GWP of $59 Trillion more or less, end of 2007. Estimates by experts is that the US contributes to 22% of the GWP, and ditto for the EU.

 

That figure of $12.5 Trillion, fellows, is simply the ‘nominal value’ of the US economy. Nominal and real are two different categories in economics. Granting that the ‘virtual economy’ based on financial speculation has been the one that raised values of commodities and services in the USA, the ‘nominal value’ is actually inflated, rendering the ‘real value’ at a much lower level.

 

Do recall when the stock market crashed in 2001. At that time, the psychological benchmark was 10,000 points at the Dow Jones. Each point in the Dow Jones then was approximately $1 Billion worth. A decline of 100 points means $100 Billion pared off from the economy, or at least the virtual economy. The stock market eventually crashed down to 7900+, which made my own hair rise with horror all over my body.

 

The stock market then stayed for a time at the 7,900-8,300 points, for couples of months, before it again steadily climbed. For simplification, let us use the figure of 8,000 points as the lowest level that the economy can crash down to, the rock bottom. That is around 77% of the 10,000+ benchmark more or less.

 

That figure, fellows, is the rough estimate of the ‘real value’ of the US economy. If we multiply 0.77 by $12.5 Billion, this yields $9.63 Billion. That’s the real figure, the real value, the real score of the US economy. If we convert this to PPP, this will rise a bit to $9.8 Billion more or less. The remaining balance of $3 Billion, to complete the $13.5B –PPP, is all ‘casino economy’ value, all speculative value and nothing more.

 

So now, going back to a previous question, where and how will the USA get funds to pay for $50 Trillion worth of debts? Do the electoral bigwigs in America possess with them the proper framework to comprehend and recommend practicable solutions to America’s ailing debt crisis and overall economic malaise?

 

I wish you American voters will do your own deep inquiries about the depth of your problems. The health of the global economy is being endangered by the impending US economic collapse, a fire that can easily burn out the EU as well (this fire had already begun there in fact). When both the EU and USA are in economic collapse or ‘fire function’, the entire global economy will catastrophically fall in deep quagmires.

 

[Writ 05 June 2008, Quezon City, Metromanila]

GLOBAL OLIGARCHS AND THE FOOD & ENERGY PRICE HIKES

Erle Frayne Argonza

Good afternoon, Fellows on Earth!

 

As already presented by this writer/analyst in my previous notes and articles, the current state of affairs of the global economy—which featured the inflationary upswings in the food and energy sectors—have a great deal to do with the machinations of the global financiers or oligarchy.

 

Across the ideological and paradigm streams, there has been the preponderance for speculations by the same financiers and subalterns that have been the main upward driver of prices in oil and food. The very same operators were also responsible for the temporary upswing in the price of the US dollar which remains as the chief legal tender for exchanging oil.

 

Below is an article from the Executive Intelligence Review that authenticates to a large degree the positions I took so far regarding oil and food.

 

[Writ 01 July 2008, Quezon City, Manila]

LaRouche: British Are Behind Food and Energy Hyperinflation

June 22, 2008–This release was issued on June 22 by the Lyndon Larouche Political Action Committee (LPAC).

Lyndon LaRouche today forcefully denounced Prince Philip and his fellow genocidalists in the Anglo-Dutch oligarchy, for willfully promoting the food and energy hyperinflation, which threatens to kill billions of people around the globe. “You cannot understand the current hyperinflationary crisis,” LaRouche charged, “without first considering Prince Philip and the late Prince Bernhard’s stated committment to wipe out 80% of the human population, through a combination of wars, diseases and famine. If Prince Philip, and his slavish followers like Al Gore were to succeed, the population of the planet would be reduced, in the next several generations, to well-under two billion people.”

LaRouche was responding to news reports, in the past 24 hours, that the combined food and energy hyperinflation, has created a global national security crisis, threatening the survival of such leading nations as China, India, Indonesia, Malaysia, Pakistan, Zimbabwe, Morocco, and Egypt. “I warned, months ago, that the food crisis would soon emerge as the number one issue facing every government in the world,” LaRouche commented. “The combined shock of $140 a barrel oil and food hyperinflation and shortages, willfully promoted by Anglo-Dutch speculators and their oligarchical backers, has thrown the world into an immediate crisis.”

On Sunday, June 22, representatives of the world’s leading oil producing and oil consuming countries will meet in Jeddah, Saudi Arabia, to consider actions to deal with the crisis. Over 40 nations around the globe have been rocked by food riots and other protests over the hyperinflationary crisis, and the worst shocks, LaRouche warned, are coming during the immediate summer months ahead. “By the time we reach October,” LaRouche warned, “the situation will be catastrophic.”

“There are remedies, even at this late date, to deal with the energy and food hyperinflation,” LaRouche continued, “but nothing is going to work unless and until we crush the power of the British oligarchy.” LaRouche asked: “Do you really think that Saudi Arabia is going to cooperate, so long as their BAE ties to London remain intact—even if the very survival of the Saudi Royal Family is at stake?”

 

SPECULATION PESTERS FOOD: U.S. CASE

Erle Frayne Argonza y Delago

Greedy financiers across the globe made humungous killing in the commodities futures recently, which largely explains the sudden hyper-inflationary price increases in grains. The panic that resulted from the ‘self-fulfilling prophecy’ that food stocks are running out further exacerbated the already volatile situation of the food markets.

The flawed reasoning—that the problem has a great deal to do with the supply side—has been bandied by the paid Pied Pipers of the greedy financiers. This is an old hat lie, and facts about the capital and financial markets belie such cranky rationale for a sector (food) that has been subordinated to predatory finance worldwide.

Below is a case study regarding the subject matter of sky-rocketing food prices on account of speculation, culled from the Executive Intelligence Review. Make your own assessment about the matter.

[Writ 30 June 2008, Quezon City, MetroManila]

Speculators Making Killer Profits Off Midwest Flooding While Farmers Can’t Sell Grain

June 16, 2008 (EIRNS)—This morning’s frantic speculation on the Chicago Board of Trade (CBOT) opened with corn (December futures) up 19 cents, for a record $8.06 a bushel (contrast to $4 a year ago); and new crop soybeans hit a record $15.53 a bushel (contrast to $8 a year ago). This is the 12th consecutive day for record-setting corn prices on the exchange, occasioned by binge-speculation off the likely destruction of at least 5 million acres (2 million hectares) of crops in the Midwest flood zone, including at least 3 million acres of corn (out of 86 million nationally).

The volume of grain and soy trading contracts is soaring on the CBOT, part of the Chicago Mercantile Exchange (CME). All futures trading has risen 26 percent over the first part of 2008 on the CME, compared to same time 2007 (including non-commodity futures of all kinds). The Commodity Futures Trading Commission (CFTC), the Federal agency which could stop the deadly game, but will not, released a report June 13, showing huge flows of funds going into the corn market. The CFTC report gives specifics on the record volumes of outstanding corn commitments—amounting to paper bushels, the way paper barrels exist in oil speculation. The CFTC says that speculative funds have added 34,732 contracts to their long positions and cut 4,588 contracts from their short positions, putting them net long on 219,041 corn futures contracts. Index funds are now net long on 427,352 contracts.

At the same time, prices are falling for the farmer trying to forward-sell his corn or soybeans to his local buyer. There has been a 12 cent drop in the prices offered to farmers for their corn over the past 24 hours! This comes on top of an average 4 cent a bushel drop in prices to the farmer last week in the Cornbelt, according to a spot check of local grain buyers, by Dow Jones. This farmer price disparity with the exchange prices, reflects not only the physical destruction of shipping and processing infrastructure, but also the fact that whenever prices spike on the Chicago Board of Trade, the local grain elevator or buyer is hit with a margin call, that he now cannot meet. So he is not offering farmers forward-contracts. Many local terminals, strapped for cash, have gone bankrupt, or sold out to the wave of hedge and index funds now on a buying spree for hard infrastructure, with which to further hold and hoard grain. E.g. WhiteBox, based in Minneapolis. The cartel terminals, dominated by Cargill and ADM, started denying forward contacts to purchase farmers’ grain months ago, under the principle: protect yourself, screw the farmer. The cartel firms offer the farmer take-it-or-leave-it prices, and terms of delivery.

On top of this, key grain and meat processing facilities are shut down by the flood all over the Midwest, for example, a huge ADM corn-processing plant in Cedar Rapids.

OIL PRICE HIKES AND MILITARY COUPS: PHILIPPINE CASE

Erle Frayne Argonza

Kapayapaan! Paz! Pax! Peace!

Oil price hike or OPH can be a precipitating factor behind military coups d etat. Since OPH is among the world’s focal issues today, we may as well reflect on a country case to examine how the OPH precipitated the launching of military coups: the Philippine case.

Before everything else, I hope the difference between military coup and mutiny is clear to the readers. A military coup is an offensive action aimed at a seizure of state power (coup d’etat). A mutiny is a defensive action, sometimes not sufficiently planned but a reaction against perceived injustices, often localized, and isn’t necessarily aimed at a seizure of state power.

In Manila’s experience, there never was a case of a mutiny that was precipitated by the OPH issue. But couples of military coups were launched that began with the OPH issue, and moved on to well organized assaults by an equally well equipped and fairly quantitatively endowed ‘warm bodies’ of an insurgent force within the national army that is backed up by its fraternal cadres within the national police.

The coup events took place in the 1980s yet, and were waged by the RAM-YOU-SFP coalition of army + police officers and enlisted men. RAM stands for Reform the Armed Forces Union, a reformist group of middle officers; YOU, Young Officers Union, a group of militant, radical nationalist junior officers; and, SFP, Soldiers of the Filipino People, a group of officers and personnel professing loyalty to the deposed dictator Ferdinand Marcos. The same coalition signed a peace pact with the Ramos regime in the 1990s, its top leader Col. Honasan had been elected senator of the republic, and is among the insurgent groups that signed a negotiated settlement with the Philippine state.

OPH-precipitated coups have been confined to the 1980s events since then, the recent attempts at seizures of power being anchored on a different set of issues. However, it should be noted that the strategic issues raised by the military insurgents then till now have always been the 3 Cs: corruption, criminality, and communism. With the decline of the Cold War and the decriminalization of membership in communist parties (repeal of Republic Act 1700 or Anti-Subversion Law), communism has become a less palatable factor in the coup formulas.

The event often ran this way (simplified timeline):

·         An OPH is officially announced, automatically raising the prices of gasoline, kerosene, diesel, lubricants, and an assorted list of fossil fuel-based downstream commodities. This will then lead to a spiraling of OPHs within days to weeks.

·         Perceiving the erosive impact of OPH on the purchasing power of laborers, the Left forces would then wage coordinated trade union protest to bring down oil prices. Middle forces and transport groups join the actions, and major cities become paralyzed. The popular actions would culminate in boycotts and calls for ‘general strike’ orchestrated particularly by the Maoists (e.g BAYAN, KMU).

·         The ‘general strike’ option is perceived as a take-over by the Communists of the state. As a pre-emptive strike to save the Philippine state from totalitarian downslide, the military insurgents launch a coup that ought to be as wide-scale in scope as possible. Certain establishments (e.g. state media) are seized, select military camps are bombed and captured, aerial assaults provide air cover, until some event will put a stop to the actions. (e.g. in the 1989 coup, the US Air Force provided ‘persuasion flights’ support to Corazon Aquino to scare away the Tora-Tora planes of the insurgents).

Sadly for the insurgents, and fortunately for the middle classes who would never again support any authoritarian regime in the Philippines, no coup attempt ever succeeded at all. However, this is not to present a fixed idea that no military coup will ever succeed in the future, this is another matter altogether.

Since the coup option has never faded in the minds of the army officers here, analysts and forecasters have to re-open the possibility of the OPH becoming again a precipitating factor in launching one general assault soon. The same thing holds for other countries as well, such as those 40+ countries that saw urban riots took place as protest reactions to ‘grains price hikes’ or GPH. A confluence of OPH-GPH would serve as a very powerful precipitating impetus for waging a coup assault for that matter.

The tall order than is to nip the bud by presenting well-blended policy mixtures and institutional adjustments to the consumers. Incidentally, this is easier said than done. Since the magnitude of OPH is indubitably global, and the causal global factors are so complex, the forced option is to use populist welfare tools such as massive subsidies to food, tax cuts, taking off oil value-added tax or VAT, trimming down import duties, and so on.

Whether such actions will not redound to hyper-inflation and fiscal catastrophe in the short run is something worth observing. In which case, spiraling hyper-inflation can be the precipitating factor, with OPH serving as one factor precipitating it (hyper-inflation). Let us see how the various states, both developed and emerging markets, will respond to the OPH and downward economic spiral of the moment.  Meantime, our jittered state officials will have sleepless nights forthcoming as army insurgents on the loose are busy organizing for their next ‘golpe de estado’ adventure.   

[Writ 24 June 2008, Quezon City, MetroManila]