Crack Economics (originaly posted Sept. 3rd ’07)

Generally, political and social events are preceded by economic ones.  While this may grate against people’s sensibilities that they act as free individuals, there are large systematic forces individuals exist within.  When society is governed rationally and in the service of its citizen, these forces lift individuals up and provide them with the basis to make choices that benefit both society and themselves.  When society is governed poorly these forces serve the ends of those with the power to chose, at the expense of the vast majority who have only the means to serve.

            We may think that grand economic and social movements are forces beyond our control, like laws of nature.  It is this illusion that is perpetuated by those in power as a way to keep the majority convinced of their own impotence.  The fact is that history is not like gravity and current world events are not like the weather.  Society and economics are nothing more than the sum of human activity, and therefore under the control of humanity. 

            As powerful as we believe we are as a people to create and sustain wealth, we are yet nothing in the face of the forces of nature.  As powerful as we believe the leaders of our nation and the world’s economies are, they are nothing in the face of the truth of the economic realities of the individuals upon whose backs the powerful rest.  It is in this context that we should understand the effect economic events will have on society over the coming years. 

The relationship between the U.S. dollar and the price of oil illustrate a larger picture of the nature of our economy and the relationship between the state and its citizens.  Since oil is priced in dollars, a rise in oil prices would be tied to a fall in the U.S. dollar relative to other major currencies.  A weaker dollar means more serviceable national and consumer debt, but it also means higher inflation, more expensive goods from overseas including oil, less buying power for the average American.  As long as the price increases are not too dramatic, nobody seems to notice.  What we had owned is now worth less, but so is what we had owed.

Prices increase to compensate for the loss of value in the dollar. Inflation rises and the cycle continues, effectively transferring the wealth from the citizens to the government.  As the government creates more money, the value of the dollar falls as does the wealth of the individuals; and the government’s debt effectively shrinks in relation to the currencies that hold our debt.  The government in effect is in the business of producing Americans, shares of which are sold to private and foreign investors. 

The owners of this country have a vested interest in devaluing the U.S. dollar just enough to continue to expand the generation of wealth, but not enough to jeopardize their investment.  Individual Americans experience the real value of their money decrease through inflation while the government as a result must take on more and more responsibility.  The government then treats any threat to this economic order as a threat to the national security of its citizens.  It is a deal with the devil in which we implicitly agree to cede our power as citizens over to the government in return for the life we have created for ourselves.    

In 2000, Iraq converted all its oil transactions under the Oil for Food program to euros. The U.S. invasion of Iraq has more to do with the fear of losing control of the universal denomination of oil the US dollar enjoys, than it does with 9-11 and the war on terror.  When the U.S. invaded Iraq in 2003, it returned oil sales from the euro to the USD.  Similarly, Iran planned to begin selling oil denominated in euros in March of 2006.  Wars continue to be fought to protect the transfer of capital from the U.S. middle class to the owners of the U.S. Government’s debt. 

We have been convinced that we have had a healthy and strong economy.  In actuality, what we now have is an economy in which credit functions like a cancer; and where we cannot stop growing our debt because it is the thing that sustains us.  The gradual devaluation of the US dollar since the 1970s has been the means by which we have achieved growth; the true cost of which has yet to be fully realized.

Each economic revolution whether agricultural, industrial, or digital is a form of the reorganization of society in fundamental ways.  While there are powerful economic currents which individuals must navigate, the source of all wealth is still the activity of individual human beings.  While the culture of debt is powerful, the individual always has a basic ability to choose.  Economic events generally precede social and political ones.  We have felt but a momentary fix of the withdrawal that awaits.  It is our national addiction, getting high off a pawned future. In crack economics, you either get clean or die a slow death.

  revolution.jpg

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