The Global Economic Crises Is Worse Than You Think

By Mark Taylor-Canfield - January 2009

Corrupt Legislation, Mural by Elihu Vedder, 1896

As we launch ourselves into the year 2009, I believe it is essential for economic and political analysts and interested observers to re-evaluate the past and embrace a new way of looking at the Untied States of America. We all need to gain a new perspective on how our society affects the rest of the planet. At the very least, we should be able to identify the ironic and irrational policies that are contributing to the current world political and economic climate.

In consideration of this new way of seeing things I suggest we begin by assessing the global economic situation which, up until now, has been for the most part generated and manipulated by powerful entities within the US. Whether it's coming from the left or the right side of the political spectrum, the message from both sides is clear - the world economy is in serious trouble.

Here's what Nicole Gelinas has to say, a spokesperson for the conservative Manhattan Institute, an economic think tank based in New York:

"If the US government was not currently backing the financial system, there would be no home loans, no car loans and no credit cards available. This is a very serious situation. There's no way to tell how long it's going to take for the world economic condition to recover."

Keep in mind that Gelinas is a senior editor for the institute's periodical, City Journal, and a member of the New York Society of Securities Analysts. She's worked with some of the biggest names on Wall Street and written for almost every major newspaper in the country.

Despite some pretty obvious and prophetic "writing on the wall", US corporate executives in the banking, real estate, investment and auto industries refused to face the music to the detriment of the entire world economy. The victims include millions of stockholders, consumers and employees across the globe.

These ultra-privileged wealthy CEOs acted like a modern version of European aristocracy. They purchased multi-million dollar homes, private jets, luxury yachts and spent like there literally was no tomorrow. As these denizens of the aristocratic super rich pushed for major expansions to their corporate operations, approving multi-billion dollar mergers and massive leveraged buy-outs, their enormous debts mounted. Much like Orson Welle's iconic "Citizen Kane", these members of the wealthy class ignored their fate until it was too late. They had become addicted to possessions and power and their material lust only increased until the big green monster of greed had devoured half the nation and sent world stock markets into a dangerous nose dive.

One good example of this phenomenon is the Seattle coffee giant Starbucks. The corporation had become the brunt of jokes poking fun of their massive expansion into nearly every community in the country, and their over expansion in certain cities.

It is not uncommon to find two or three Starbucks located within a few blocks of one another. Hence the joke that goes something like this:

"How do you find the Starbucks in Seattle?" Answer: "Turn off the freeway, take a left at the Starbucks, a right at the Starbucks and then it's just down the street next to the Starbucks."

For the last two years Starbucks executives, including current CEO Howard Schultz, have been telling their stockholders that the company is in great shape, even while sales plummeted. This year, the company's stock value dropped precipitously and they fired their CEO and hired Shultz again. Instead of opening 1,700 new cafes, as Shultz had boasted last year, the coffee monopoly has announced it will close 600.

When I attempted to warn a Starbucks stockholder a year ago that Schultz had been pulling the proverbial wool over their collective eyes, she reacted with complete contempt, saying, "He wouldn't lie to us!"

Apparently this woman didn't understand the basic premise of corporate hype. Schultz's main goal was to keep shoring up the confidence of his stockholders at a time when the company was facing a major downturn in its fortunes. How do you maintain access to capital when stockholders are divesting? It was all perception - a psychological confidence game to convince people to continue investing in Starbucks and its future.

The reality of the situation was eclipsed by Shultz and his cohorts and their need for increased investments to prop up a coffee company that had seriously over extended itself and was in financial trouble.

Other Seattle-based mega corporations are also suffering financially as their stock values drop. The lumber giant Weyerhauser Corporation is laying off one thousand employees at its international headquarters near Seattle. The logging industry in the Northwestern US died long ago, but the current economic crises has further eroded the company's profits world-wide.

The federal government has seized the assets of the failed Washington Mutual chain of banks, the world's largest savings and loan. J.P. Morgan, Chase and Company now owns Wamu and they have announced the lay-offs of 3,400 people at its corporate headquarters in Seattle. This represents one of the largest bank failures in history. Since the sub-prime mortgage crises began less than a year ago, banks and brokerage firms have eliminated 190,000 jobs around the world.

Microsoft, baby of two of the wealthiest men in the world, says it will significantly reduce the number of new employees it hires next year. The aerospace mega corporation Boeing has laid off 20,000 workers since 2002, much of it due to outsourcing of jobs to Asia and Europe. In the Seattle metropolitan area, businesses are cutting their workforce, including Quadrant Homes which is getting rid of 20% of its employees. The Seattle Times and The Post Intelligencer have both made major reductions in staff. The commercial truck manufacturer Kenworth and local boat manufacturers are also cutting employees. Insurance giant Safeco is also downsizing.

According to The Seattle Times (December 28, 2008) much of the 2.5 million square feet of office space in the many newly built towers in downtown Seattle could remain empty due to serious over development during the national economic downturn. Times reporters say that a "ripple effect" of "tsunamic proportions" could wipe out many local businesses.

To further the point, consider this. Municipal, county and the state government departments have announced major lay-offs as well, the result of a multi-billion dollar state budget deficit and struggling local communities. The State of Washington says it will axe 200 jobs immediately to cope with the financial crisis. Locally, nationally, and internationally, the economic depression is affecting millions of workers. Every time a major employer makes drastic cuts in personnel, other local businesses suffer as well. When folks in the community lose their source of income, they are no longer able to support local restaurants, malls and grocery stores, not to mention the millions of small family-owned "mom and pop" operations throughout the nation. It's also called a "domino effect". In 1928, 2 percent of the population in the US controlled 98 percent of the wealth. When the workers can no longer afford to buy the products they make, an economic depression follows.

Does all of this sound alarming? The effects of the current economic situation which began in the US is being felt world-wide. Here's a direct quote from Katsuaki Watanabe, President of Toyota, Japan's largest automobile manufacturer:

"The change in the world economy is of a magnitude that comes once every hundred years. We are facing an unprecedented emergency. Unfortunately, we can't see the bottom."

Incidentally, Japan's Gross National Product (GNP) has fallen for two consecutive years - the first time that has happened since 1980. Japan's GNP was down 26.7% in November 2008. Toyota's sales in the United States dropped by 34%, and the company is predicting $1.7 billion in losses next year.

Car manufacturers in the US have experienced some of the worst sales in their history. At least 900 US car dealerships have been forced to close resulting in the loss of 15,000 jobs nation-wide. Here's the casualty list: General Motors sales down 41%; Chrysler down 47%; Ford 31%; Honda 32%; Nissan 41%.

Car dealerships in the US lost billions of dollars in sales in 2008 because consumers are just not buying. Due to the poor economic situation, and the consumers' widespread disaffection with their products, US car makers are hitting the skids and say they will not be able to keep their factories open without government assistance.

30 years ago Detroit promised the world they would develop the electric car, but let's be clear - they have been in bed with the oil companies all along. US auto makers refused to offer the public fuel efficient cars, or any other alternative. Now these same companies are flying their corporate jets to Washington, DC, begging the government and the taxpayers to bail them out. While considering Detroit's refusal to offer any alternatives to the oil-based gas combustion engine, I draw the reader's attention to these salient facts:

1. European auto manufacturers are required by law to provide fuel efficient cars. The minimum GPH for a European car is 45 miles per gallon. In the US most new cars get around 30 miles to the gallon.


2. The fastest car in the world, setting land speed records in the 1920s, was the Stanley Steamer, powered by heated water.


3. In 1909, there were 100 taxis in New York City and 98 of them were powered by electric motors.

So where is this technology now? During the last century, the oil barons and their cohorts were able to conspire to put a virtual quarantine on any new technology. They put our technological development back about 100 years. How were they able to do this? I say, look to their political connections for the answer to that question.

Another ominous set of dire predictions came recently from the President of the Federal Reserve bank of Dallas, Richard W. Fisher. On December 26, 2008, Fisher addressed the Dallas and Fort Worth World Affairs Council. His speech was entitled "Historical Perspectives on the Current Economic Financial Crisis". Despite his position deep inside the belly of the beast, Fisher sounded surprisingly irreverent. He took aim at corporate CEOs who have bankrupt their businesses and the nation. His talk immediately took on a humorous and satirical tone and he rarely ever let up on his castigation of corporate executives whose priorities lay in trying to negotiate compensation packages and multi-million dollar "golden umbrellas". He condemned them for caring more about personal gain than the health of their own businesses. He referred to the recent stock market fluxuations as both "historic" and "hysteric". This powerful member of the elite Federal Reserve cognicinte blamed the current crises on out of control greed, corruption and denial.

Although he's probably right, I can't help but snicker a little at his funny admonitions against corporate excess. The Federal Reserve is, after all, at the very center of the current economic controversy. Their policies have been vilified by civil libertarians and progressives since the days of Andrew Jackson.

Meanwhile, 250 US businesses go bankrupt each day. This figure is up 42% since 2007.

In contrast, Washington State Liquor Control Board spokespersons report that alchohol sales are up 5 to 10 %. According to their records, the most popular drink in the state is now Tequila.

But don't fear precious readers, there is an obvious transformation taking place during this economic apocalypse. One definition for the word "apocalypse" is a "revealing" of past digressions from morality and wisdom. The thin veil of capitalism has been pulled aside to reveal a nasty multi hydra-headed monster which feeds on greed and corruption at the highest seats of power in the US.

First of all, "free enterprise" does not exist in a climate of rampant and unregulated take-overs and mergers. The result of all this has been that a few omnipotent monopolies have stifled all competition and blocked any attempts at innovation and sustainability. Capitalism as it stands is failing even to sustain itself, let alone sustain any semblance of a more peaceful, just and earth friendly system of finance. The US government's response to these economic failures and the insidious blackmailing of the American people by major corporate interests has been to transform our society into a corporate socialist state.

The taxpayers are now expected to give billions of dollars to incompetent and corrupt corporate executives, thus increasing the national debt, and eliminating any possibility of funding national education or healthcare programs. The national balance sheet is looking pretty dismal. At a time when we are bogged down in two wars that are draining our resources, and while the corporate raiders have already raided the national treasury, we are now assuring that these fat cat corporate execs can continue to buy their Lear jets, Gucci shoes, Armani suits and Rolex watches at our expense.

The world is, indeed, a strange place when ironies abound around every corner. As the Israeli army continues to kill innocent civilians in Gaza with high-tech military weapons, Iraqi journalist Muntadhar al-Zaidi is being tortured for throwing a couple of shoes at George W. Bush. According to his brother, Dhigham al-Zaidi, Mutadhar was beaten with pipes and his skin was burned with cigarettes, presumably by Iraqi security forces. His torture and beating has inspired hundreds of protests by Iraqi citizens. Is this what Paul Bremmer had in mind when he said he wanted to bring "democracy" to Iraq ?

As the world economy goes into a death spiral to which there seems to be no end, the US continues to threaten Iran, a nation that spends 1/110th the amount of money on its military when compared to the US budget. The GNP of Iran is approximately 1/158th that of the Unites States.

If the world economy continues to tank and these purvayers of irony continue to hold sway in global power structures, our fate is sealed. I predict that within a few years the US will no longer be a world leader, but a follower indebted to the rest of the world. After so many years of fighting the cold war against Marxist economic philosophy, we will become a socialist state. Perhaps this is the greatest irony of them all.

George W. Bush: "The system is not working properly."