CONTINUING BOURSE PLUNGE DOWN NEAR DEPRESSION LEVEL

Erle Frayne Argonza

Good afternoon, Fellows of Planet Earth!

The planet’s bourses are still plunging as of yesterday (Friday), a day that was dabbed as ‘black Friday’ in Japan which saw the Nikkei plunge by 10%. ‘Bloody Friday’ may be a better term, as the word ‘black’ in ‘black Friday’ could be construed as a racial slur.

This gentleman is among the economists/social scientists in Manila who forecast, way back in the late 1980s yet, that the Western economies led by the USA will experience another horrific depression this decade. We were then following the trends of a yawning gap between the ‘financial economy’ or ‘virtual economy’ and the ‘real economy’ based on the GDP statistics. The American economist Lyndon LaRouche devised a very potent graph of the event which he termed as ‘collapse function’.

As of late 2007, debts in the USA already exceeded the GDP by four (4) times. That means that, in the event of a bubble burst (which came from the realty markets), the economy will come crashing down. It is simply impossible for a $13 Trillion GDP to pay up for debts approximating $50 Trillion last year. In the secondary debt markets, financial derivatives exposures breached the $120 Billion mark in the USA last year, and that all the more exacerbates the weakness and fragility of a $13Trillion economy that simply doesn’t have the money to pay up for ballooning private and public debts.

My own forecast is that the stock market plunge across the globe, which is now in the vogue of a ‘freefall’, will continue till next year yet. At its best, the Dow Jones index reached past 13,000 points about less than a couple of years ago. The same index had already shrunk below 10,000 points at its worst. By next year, the Dow will further shrink by as low as 8,000-8,500 points, the range that actually represents the real value of the entire US economy.

1 Point in the US bourse is equivalent to $1.5 Billion more or less, at its best. A shrunken size would deflate the value to around $1 Billion. At 13,300 points, the Dow index represents a value worth $20 Trillion, which seemingly exceeds the GDP of the entire federation. But that amount is largely speculation, the speculative value exceeding beyond 50% of the real value of the commodity lines traded.

8,500 points in the Dow index would yield, at deflated value, around $8.5 Trilion dollars. That same estimate is the real value of the US economy in GDP terms, per year, as of today. The value of $13 Trillion includes the value of speculation and fiction, on account of the predominance of the ‘virtual economy’.

As I’ve already explained in a previous article, the Bush-Paulson bailout, allocated an amount of $700 Trillion, is a faulty measure to salve the financial ailments of the USA. It follows from the flawed Japanese ‘crisis management’ bailout of huge banks that went in the red last decade, a tragic measure that flattened Japan’s growth to almost zero for around ten years at least. It is a band aid solution to a gargantuan problem that is equivalent to cancer, and everybody knows that band aid doesn’t cure cancer.

That explains the jittery situation of the post-bailout law scenario. Financial traders and investors who still recall well the Japanese fiasco just couldn’t be appeased by a repeat of the same band aid solution, this time to an economy almost three times bigger than Japan’s (in real value). For as long as no strategic solution to the global financial crash is in site, the stock markets will be jittery till next year, and before long we would see both the USA and Europe plunge back to the depression years of the mid-1920s to early 1930s.

Let’s see what will happen to the election fever in the USA. Some liquidity will be produced by the election spending there, and the optimistic pitch created by the electoral situation may somehow drive back the bourses up a bit. That is just a temporary respite from the blazing flames of the crash, rest assured.

[Writ 11 October, 2008, Quezon City, MetroManila]

CAPITALISM’S DEMISE: WHAT WENT WRONG?

Erle Frayne Argonza

To all fellow men and women out there who may have deep fondness for the liberal capitalist model of economic adaptation, I hope that you can make some adjustments in your cognitive banks. Capitalism is not a permanent facet of human life, but merely one among various epochs that will come to pass. Only impermanence is sacrosanct in the cosmos, so please refrain from singing hallelujah to a world system that is on its death knell as I articulated in a previous article.

And please refrain from swallowing hook-line-&-sinker the contentious propaganda of Francis Fukuyama about the ‘end of history’, that accordingly history had concluded with the galvanization of liberal capitalism, that history makes no more sense. Fukuyama’s theory is a slapstick narrative of hyper-valuation of the ‘mad economics’ of late capitalism and hypo-statization of reality that has no relation at all to the real in the world out there. Fukuyama had taken as ‘real’ what is actually ‘virtual’, and froze time much like unto a fairy tale of timelessness, of history-less Nietzschean moment that is fit more for infants than for adult humans.  

Fukuyama epitomizes the ‘mad economics’ of all those Pied Pipers of the global oligarchy for whom he works, and his discourse is akin to the ‘mad discourse’ so described by the late Michel Foucault. The ‘mad economics’ of Friedman, Hayek, Fukuyama, and all those technocrats who serve as processors and bagmen for the global oligarchy, is precisely symptomatic of that colossal ailment of a world system, and as we all know, madness can never salve ailments but rather hasten the system’s death. Caput! Blow your horns, prepare dirges to this Dead One!

Unless that you yourselves have become maddened by the seemingly infinite monies flowing unto your purses as you are among the beneficiaries of ‘late’ capital, unless that you are indeed now suffering from combined maladies of sociopathy and schizophrenia, unless that sanity had departed from thee forever, please heed the last plea of your own conscience where sanity had retreated: CAPITALISM IS DEAD! No amount of propagandizing, of contorted interpretations, can ever change the course of history at this juncture, as we are all headed for a TOTAL SYSTEM COLLAPSE in the months ahead. Read that please: MONTHS AHEAD, not years ahead.

What went wrong with capitalism? I’m sure all of you fellows knew what went wrong, do I even need to answer that? Your previous thinker mentors, among economists and sociologists, forewarned you all of the forthcoming demise of capitalism, but you paid nary an attention to those brilliant minds as you were so engrossed in your ‘conspicuous consumption’, behaving more like some infantile EATERS or as anthropoids rather than as thinking and spiritually evolving humans. You are all very much human, so please consistently behave like one, and begin by listening to the Inner Voice of your conscience, for that voice is your soul’s.

Let me summarize the diagnostics, forewarnings and/or prophecies of our thinker mentors from the West, and I’d stress WEST because there are some other thinker mentors from the EAST and SOUTH whose peregrinations are so recondite they are not so easily digestible. Let me just stress the WEST as this is what is common to us all. So let me re-echo the thinkers and their theories:

·        Karl Marx & Friedrich Engels: The internal contradictions between the private nature of capital (ownership of means of production) and the social nature of production. The ‘crisis of overproduction’ and the ‘law of the falling rate of profit’ are attendant patterns. Social revolution results, then the alternative society will be constructed.

 

·        Max Weber: Industrial capitalism’s granite product, the bureaucracy, led to dehumanization. He never forecast though whether this dehumanizing system can be sustained—but please read between the lines. (His contemporary Emile Durkheim had a similar observation about ‘anomie’ or normless state of urban/industrial society.)

 

·        Thorsten Veblen: The end-phase of industrial capitalism is markedly pathological. ‘Conspicuous consumption’ is the disease of this phase, the toxic behavior from the ruling class that later filtered down to the emerging middle class.

 

·        Joseph Schumpeter: The internal contradiction between the desire for profit and the revolutionary character of innovation. The demise of capitalism will see the possibility of the technical class taking over society and build that alternative system later.

 

·        Daniel Bell: The ‘post-industrial’ society had already been born right inside capitalism. A distinct modality in itself, post-industrialism will eventually prevail in a system that isn’t capitalist (or money economy) but rather knowledge-based. The ‘service worker’ had arrived on the social landscape, the prototype class of the future.

 

·        Theodore Adorno, Jurgen Habermas, Herbert Marcuse: ‘Late’ capital is characterized by the pervasiveness of ‘instrumental reason’, where reason is used to justify the non-rational (‘madness’ in Foucault’s argot), where state planning/intervention was infused into a system that scorned intervention.

 

·        Alvin Toffler: Both capitalism and socialism are based on hoarding, both are variants of the same industrial society of yesteryears, both are based on ‘2^nd wave’ capital-intensive technologies and non-renewable energy sources. The ‘post-industrial’ society is altogether distinct, isn’t based on hoarding, production-consumption (‘prosumer’) is based on ‘3^rd wave’ knowledge-intensive technologies and renewable energy sources, knowledge cannot be hoarded.   

I need not articulate further, do I? They all converged on one theme: capitalism is transitory, it bred social maladies (alienation, dehumanization, anomie, conspicuous consumption,…), is systemically flawed, and will be dismantled at sometime in the future.

No matter how delimited their theories maybe, as they all proceeded from certain perspectives (they were all ‘paradigm’-based in the jargon of Thomas Kuhn), they all proclaimed—in either tacit or explicit fashion—the coming demise of the system. They weren’t as silly as Fukuyama who popularized seemingly ‘satanic verses’ (distorted precepts) about a non-changing, permanent economic landscape called ‘liberal capitalism’, but were rather so adroit at social forecasting that they saw a vision of the future as they were articulating on their empirical observations of the present society.

So, fellows out there, prepare for the months and years ahead. We are headed towards those stormy months, years, maybe even decades. How the future society will come to shape is not easy to forecast. “Something blurs the Force, darkens our sight of the future,” declared a Jedi Master in the Star Wars cinema fame. Let me end right here.

[Writ 22 August 2008, Quezon City, MetroManila.]

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]

RECESSION STAYS, SPIRAL POINTS TO GLOBAL MELTDOWN

Erle Frayne Argonza

The recession stays, the downward global economic spiral will continue for an indefinite time. This is the pattern that we can now see across the globe.

Stock markets have been crashing, going through a freefall for couples of months now. In Manila, the Philippine stock market is down at 2,500+ points as of this morning, or 800 points short of its best performance of 3,300+ late last year. The pattern is true in other stock markets as well.

One thing is clear: this is a global meltdown going on, and the spiral’s turn-around towards more positive gains in the succeeding months. Trillions of dollars have already gone down the drain, loses that may never be recovered again.

Many pockets are getting badly hurt, both from the fund-rich hedge funds and portfolio financiers to ordinary middle class investors. Just about two (2) years ago, everything was bullish in world stocks, most especially in Asia. That situation had since evaporated.

Unfortunately, the harbingers of liberal dogma are still banking on liberalization policies that have proved to be so bankrupt they are, in fact, the very cause of this global meltdown shaping up. The ‘virtual economy’ unleashed by liberalization resulted to looting sprees by fund managers and hedge fund operators, the same money that they partly utilize for corporate social responsibility.

Now the oil price hikes and currency market volatilities have compounded the recession. It’s just mid-2008 by the way, and there’s still the bombing of Iran that we all await as the non-surprise ‘surprise attack’ from neo-cons and Zionist fascists, which will guarantee higher prices for oil and better dollar leveraging power. This will come sooner or later.

Forecasting has been made simpler by anarchic events at this moment. There is no end in sight to the recession, oil prices will still move up, and the recession will lead to a deeper meltdown of the liberal financial-monetary system of casino-style looting by financier operators.

Better do some belt-tightening if you haven’t done this yet. Let’s continue to watch the horrible unfolding of events. Madness and unparalleled greed have shattered the financial-monetary system, the ‘virtual economy’ of predatory financiers.

[Writ 12 June 2008, Quezon City, MetroManila]