Eating Their Seed Corn

by Dr. James Glenn | February 8, 2010

Before Kraft (BK) farmers would keep part of each year’s corn crop as seed corn for their next spring planting. In this way perpetuation of the strain was assured. However, farming being what it is, and subject to the vagaries of earth, wind, fire and flood, their crop would often be destroyed, and what had been saved for future generations in the form of seed corn, would have to be eaten to survive the winter. This effectively put the farmer, and his children and grand children, out of business.

I’ve watched with trepidation, and dismay for over 30 years now as esoteric, and generally dead wrong, economic theories like supply side economics, trickle down economics, lassez faire economics, and Neoliberalism have run rampant and unchecked across the globe, like the four horsemen of the apocalypse, ravaging any economy unlucky enough to attract the attention of Wall Street financiers and hedge funds. The results of these literally bankrupt economic and financial policies are now coming home to roost here in the states, and worldwide, as the pernicious financial architecture crumbles around us. Hedge funds implode, CDOs disintegrate, the middle class is obliterated, savings go negative, deficits soar, and the dollar collapses, yet those at Goldman Sachs will get their Christmas $500,000. Bonuses after all. How reassuring. What is wrong with this picture? What on earth has happened to the promise of America?

The disciples of the Chicago School (University of Chicago School of Economics), wealthy scions of the landed gentry from South America, Africa and parts of Asia and Europe, who studied in the 70s & 80s under Milton Friedman in Chicago, upon graduation, were sent like Mormons, South and East to spread the now totally discredited gospel of Neoliberalism. Generally, this called for totally open financial architecture, whether economies were ready or not, deregulation of all state industries, and privatization of all state assets, which were generally sold to opportunistic, and avaricious cronies of those in power at the time. This frenzied spate of “deregulation and privatization” throughout South America, Russia, the US and Eastern Block countries in the 80s and 90s gave rise to the “apparatchiks” in Russia, Pinochet in Chile, Peron in Argentina, and Geisel Brazil. The “invisible hand” and the “free market”. And the “bottom line”, were touted by these miscreants, thugs, and dictators and “neoliberals all”, as the panacea for all that ailed these countries. We got our own “Democratized” and homogenized neo liberal, supply sided version in the form of Ronald Reagan in 1980.

Working in collusion with the World Bank, the Central Bankers Bank, and mostly large money center banks like Goldman Sachs, and J. P. Morgan, the politicians in these countries struck deals with the banks, and many, many multinationals to sell off state assets for pennies on the dollar, to individuals and organizations who had absolutely no interest in the long term viability of those economies. Sound familiar? These politicos and elites sold out their countries, signing and enforcing contracts never agreed to by the majority of their populations. Sound familiar? Here in the states we were assured that privatizing industries like airlines, banking, transportation, education and healthcare would bring us improved, cheaper, and more efficient service! Hardy, har, har!!LOL!! We actually bought it! despite absolutely no empirical, or anecdotal evidence showing that these claims were true. Thus, “Reaganomics” was born, the dirty step child of The Chicago School and The Laffer Curve. Or is that the Laughter Curve, with the sad joke played on us? The blowback from these disastrous trade, fiscal, and monetary policies can now be seen around the globe as the dollar crumbles, and left leaning, autocratic regimes rise out of neoliberal ashes in Venezuela, Argentina, Brazil, Bolivia, Peru, Chile, Russia etc.

Of course the proponents of all this nonsense hide behind a cloak of “free trade” and “free markets” which it seems any self respecting economist, pseudo intellectual, or “informed” person must be for these days. The platitudes are often mouthed by those without the slightest understanding of their ramifications, whether it’s your friend at a cocktail party or an idiot on CNBC. As Rome burns they assure us the answer lies in more, and open trade with partners who have no respect for women, children or labor. The major media outlets, 90% of which are owned by mostly right wing elites, have pounded the message, that despite all the anecdotal, and now loads of empirical evidence to the contrary, that this neo liberal, “free narket” nonsense is good for us. Just goes to show you that Goebles was right, tell a population something long enough, and eventually they’ll believe it.

We have been sold a bill of goods by politicians who have eaten our seed corn. Jim, my friends say, “What’s the big deal? It’s only a building, a highway, a company, a water supply we’re selling. So what if a foreign company owns it. It’s always happened. Remember the Japanese in the 80s?”

The very simple answer friends is that when a productive asset owned by an American company, individual or government is sold to a foreign entity, that asset, and all it’s future cash flows, whether it’s a port authority, a bank, a highway, or company, will be repatriated to that country. All current and future benefits that might have been derived from that asset, accrued to US citizens, are gone forever. This is a huge blow to our already suffering economy, depriving it of investment dollars that otherwise would have been plowed into productive pursuits here in the US. What investment dollars remain in the US must compete with government, depriving industry and business of needed capital. For example, just to fund our deficits we need approximately 2.5 BILLION dollars a day in investment or loans from abroad (about 50% of it), and the annual debt service on the 10 Trillion in debt accumulated since Reagan, and owed to foreigners holding that debt, is nearly $600 million per year (20% of the budget). This is not sustainable friends. No economy has ever been built, and survived, on debt and consumption. Economies are built, survive, and thrive, on savings and investment, not our present model of ever growing debt and consumption. As the debt service limits of consumers, business, and government are reached, the debt bubble begins to implode on itself. This is what we are beginning to see now as the disastrous policies of our central bank reveal themselves.

More meaningfully, the trade policies, and fiscal and monetary policy pursued by our Central Bank and Government, which gave rise to these incredible trade deficits, now approaching one TRILLION dollars a year, and asset bubble economy, must be questioned, and ultimately soundly rejected by us all before it is too late. Trade deficits of this magnitude always lead to a collapsing domestic currency (what we are seeing now) which leads to inflation/hyperinflation, rising interest rates, and of course, a collapsing standard of living for all of us. Asset bubbles created by the central bank, primarily for banks and elites, tears and rend the social fabric, distort capital allocation and the pricing mechanism, and destroy those trying to live on a fixed income. All so that a few banks can make TRILLIONS of dollars on the backs of the poor and ignorant, those that are always left holding the bag from the bubble. Bank profits during the real estate bubble for example quintupled but did we hear any indignant outrage from stockholders or homeowners, whose assets were raising at a 25% a year clip? Of course not. They are however morally outraged when an oil company declares a net profit of 11%. Goldman Sachs profits up 60% a quarter, year after year, Exxon’s up 11%. Do you see the hypocrisy? It would be one thing if these ridiculous asset bubbles were a net gain to the economy. But like the inflation they generate, they are not. They are merely a very clever wealth transfer mechanism, designed to transfer wealth from the lower and middle class, to the upper class and elites. There is no NET gain to the economy. It is a zero sum game. The asset doubles for one and becomes twice as expensive for another. This is not morally, ethically, or economically sounds friends. And it is what is destroying us as a nation as I write this, not gay marriage.

In similar vein, the drivel spouted by the uninformed and right wing wing nuts at the Wall Street Journal, that a falling currency is “good for us” makes me want to spit nails. Us? Oh, you mean a handful of multinationals and that 10% of the economy that exports? Sure, but what about the 90% of the rest of “us” I ask? A falling currency IS NEVER GOOD FOR “US” friends. Never has been, never will be. If I were a pimp, it would be like me saying that because hookers bring increased traffic to the neighborhood, they must be a good thing. The argument is totally disingenuous. Outrageous and specious at best.

Very simply, as the dollar goes, so goes our standard of living. Those at the Treasury (Paulson), the FED (Bernarke), and the administration (Bush & Cheney) are no different than any of their neoliberal predecessors. The esoteric theory du juor, supply side economics et. al, is merely created by our neo liberal friends to justify the pillaging of the Treasury and the economy, whether it’s the hilarious “trickle down” or the mendacious “Laffer Curve”. Justification for theft on a scale unimaginable until six years ago (or since Reagan). The saddest part of all, at least to me, is what we have now burdened our children and grandchildren with, 10 Trillion in debts and counting. There’s no corn left in the crib. Nothing but a stack of IOUs.

What the gullible seem incapable of grasping is that trillions owed and now held by foreigners because of these myopic trade and monetary policies, are now being used to buy up our country, our seed corn, one piece at a time. That is the “difference” friends. When the Japanese were buying we didn’t have a 10 trillion dollar debt, another 45 trillion in unfunded government liabilities, and a collapsing dollar.

Egg rolls anyone? I love Chinese. Gotta go brush up on my Mandarin and Cantonese.

Hello: My name is James Glenn and I am delighted to be working with you all. I grew up in Washington DC, and attended American University where I obtained a BSBA in Finance with a minor in marketing. I have thirty years broad based experience in business development, brokerage, banking, commercial lending/underwriting, credit analysis, management, public relations, relationship selling, valuation and investment consulting and most recently, teaching. I have developed over the years exceptional researching, and writing ability, and superior spreadsheet and computer skills, and hope to bring some of these skill sets to bear in this course.

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