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Globalization

Free Trade, Free Markets & Globalization

This site is not intended to be a "we know everything about politics and globalization" site. I don't think anyone could know it all.  For people who have been into anti-globalization for a while, this is pretty basic stuff, but we all have to start somewhere. Feel free to share and inform us!

Back in the olden days... it was a perfectly natural thing to trade with your neighbors.  People would make things, bake things, grow things and such, and then trade each other for what they needed.

After a while, it became pretty common agreement that certain things were worth certain values, and so a standard of value was accepted. Of course, you could always haggle.

Then, people became industrious.  Reselling became popular, or growing and making in excess, and the idea of profits was born.  The key was, you didn't want to spend money to create supplies when there was no demand.

When transportation between cities, countries and continents became simpler, we began generating a global economy.  To determine the value of goods, they would state a price and agree upon it, based on a certain currency, and then adjust it based on which direction the trade was going, and the value of products in the destination.

There was something called the Gold Standard.  It was like a poker game.    Whoever had the most gold is richest... but, like the players in a game, there was only so much gold, and so the idea was to win it away from each other, one hand at a time, until someone either won it all, or had so much that the bets they placed could not be matched by their opponents.

So, the gold was the prize.

The problem was, the united States was spending more gold in other parts of the world than they were with us.   So our pile kept getting smaller and smaller.    And, somewhere along the line, we decided to ignore the idea that we had to have an equal amount of gold for the number of dollars we distributed.

The goods we brought in had no tangible, durable value, whereas gold remained stable and rose in value, or at least retained a relative value in the market in which it is held.

So, Why not just print it?  And then.... voila, the Federal Reserve Board.    Lots and lots of money.  But for some reason, we hired this company, not part of the U.S. government, and took the Constitutional right to make and distribute the money from Congress and gave it to these... people.  They put the title Federal on the front of their name so people would think it was a government institution.

And they printed money, and printed money and printed money and spent it.  Sounds like a good deal.  Print as much money as you want, and then spend it.  But there were a couple of hitches.

First, the trade deficit was still there.  We just had more dollars to send.    So prices went higher, inflation began, and the deficit grew and grew. To pay for things at higher prices, we had to have more dollars.  So, we'd have the Federal Reserve print it for us.

When Congress had the right to print money, it basic only cost us labor, paper, ink and distribution.  But when you get it from the Federal Reserve, they sort of take back the advantage of printing money by charging us interest.

I don't know why, either really.  Maybe someone will inform me.  Read Billions for Bankers, Debt for the Poor for a closer look.

Nonetheless, we were caught in a trap of spiraling costs and spiraling deficits.

The inflation of the Nixon and Carter years was an interesting turn. Corporations, and individuals, made huge amounts of money from selling properties and assets at high profits compared to purchase prices.  The more inflated the dollar became, the faster you could make a profit.

It was like getting checks in the mail.  Lots of extra dollars with no durable value or productivity.  And people noticed a pattern, and invented the term 'Cash flow scheme".

The corporations could invest in an asset for ten dollars, wait 3  months and sell it again for 40.  Then the economy stabilized, and there they were with a huge pile of money, and they didn't have to make any products or do anything except let the asset sit there.

The tragedy was that home buyers sold their homes that they'd bought in the 50's for $10,000, sold it in 1975 for 200, 000, bought a $250,000 house based on anticipation of increased earnings... then when the market stabilized and prices went back down, people were left with large loans, high interest, and the inability to sell them, even for the purchase price. So that began a slew of bankruptcies for individuals in America. (Notice the similarities of the stock market crashes over dot coms and technology recently)

It'ss why, when there's a surplus of goods, prices go down, because manufacturers have to turn a lot of money over to pay staff, rent, etc. And their money is tied up in inventory. Therefore, when demand is low, suppliers sell cheap to generate cash, even though it does not produce a profit.

The prices will steadily get higher when the demand is high so the company can make profits again.  But the important thing is the cash flow. So manufacturers decided, they could control the value by only making enough, or a little less, than they needed. Like gasoline. That way, they could control the profit margin.

The government said, that's fair, you have a right to a profit. And the businesses said, we're really good at economics, so why don't we do the leg work on this stuff, you pay us our profit margin, and everything will be fine.  And that's what happened. In a perfect world, it made sense.

Now we get to the crux of the economics.

We used to use  a system that was called a managed or stabilized economy.  It was based on the theories of John Keynes (pronounced canes).  He believed that government should take active part in the administration of public utilities and commodities, as well as in regulating pricing and such, in order to provide a safe economy that rarely grew and rarely fell. It was definitely aimed at administering to the people, and determined good to be of primary benefit to people, average citizens.

When the economy  would start going low, they adopted the attitude that most simple solution was to start a war.  This goes way back in time.  Why?    Well, first, an obvious lack of creativity.

Second, though, was their ability to employ thousands of people to make weapons of war, kill a lot of people, then make another huge profit on fixing a country when we were through blowing it up.

The free market theory isn't a whole lot different in its basic paradigm, except that the profitability of corporations became the icon at the top of the chart, instead of citizens.

It was to stabilize the economy, instead of having the government regulate it for the advantage of the people. If they were in good shape, Milton Friedman and Friedrich von Hayek concluded, the prosperity would trickle down to the people at all levels below them.    So, if the supply side was healthy, so was the nation.

They believe that supply and demand would resolve the issue of value, and that citizens would form "unions" or coalitions to represent the interests of the citizens.    The citizens have to figure out themselves how to make roads and bridges and things that don't move, can't be sold, etc.  That's for the government, because there is no profit potential.

I don't quite see how they call that a free market... since citizens have little say about how it all is done, and compliance with corporate interests became part of the bargain....  But they had to shift the approach to be concerned with the welfare of the business before people.  It was not seen as inter-dependent, except that we had to keep people working to make products to sell, with as little spent on the people as possible, because they are a cash flow drain. Welfare was a waste of corporate money.

So they thought, what if we put churches and non-profit organizations in charge of the needs of the people. It would fulfill a desire to ground Americans in solid, religious values and desired social behavior, and relieve the government of the financial burden and administrative burden, even creative burden, of determining a solution to the nation's social concerns.

The Constitution is opposed to the insertion of Religion into government because Religious Tyranny was what they fled.  They saw church leaders governing the masses, and representing the needs of only the people who complied with their doctrine.

They did not see the opportunity to worship the way they wanted, observe their own social customs and believe in the God of their choosing for the reasons they chose.    They saw it as a way to oppress and control people, instead of empowering them.   And they thought it was for their people's good.  They knew better than the individuals.

Nonetheless...  this sets the stage for globalization.

Imagine this.  You're in a room alone with 4 sets of twins, about 2 years old, and they're crawling and moving around the toys and the furniture.  They're all dressed the same. Your job is to give each of them 2 minutes of time to drink from a baby bottle, one after the other, over and over again.  To make it fun, we'll make a rule that you're not allowed to observe them or place any identifying marks on them. And, that you can only feed them when they come to you.  But they won't.  And how would you know which one they really were?  Did I mention you were also making apple pie and drinking a lot of beer?  Good luck.

But imagine if you get them to lined up in pretty little rows, and they were still while you  went down the line with precision and certainty.  There are two agreements that must be made to do this.  The caregiver must reliably provide the care, but they'll only do it if the person receiving care conducts themselves in the prescribed manner and location.

Remember customer service?  Notice how, as  time goes on, it takes you more time to manage your personal affairs and is an ever greater source of frustration, and you think to yourself, I didn't used to have to do this.  Most of this was all handled for me. 

Service went the way of the dinosaur the year Kmart surpassed Sears as the world's largest retail, with a paradigm of low prices and little service overhead. People are expensive.  They make mistakes, steal product, don't produce enough and overall seem to be a negative financial asset.  I am not attempting to make a "case" against KMART at all.

But, as people moved more regularly from community to community, the concentrations of people were moving.  The shopping centers had to move too.

Sears expanded with the idea of building commerce, and equities, by buying commercial locations at low prices, building a store, then a mall, and gain from the land appreciation as well as the percentage of profits and rents that businesses pay to mall owners.  Even more, it created an investment and commitment to a community.

Even more, they sold few brands that they did not own.  If there was a good brand that people wanted, they'd buy the company.  Like, Gibson, White Spot, Sanyo, Fisher... on and on and on.  It was a good plan.  But it was not a good formula for a global strategy.  It was, in the days of its founder, a family, community store. A Rockwell painting.

Kmart expanded by locating current population concentrations, building low utility and less expensive buildings, keeping the overhead low and the volume of products moving,    It worked well, because people were treated to discount prices.  Because of the volume, cash flow could be generated relative to promotional efforts, not actual demand. And when an area became less profitable, they simply closed the doors and went to another location.

Kmart was also shrewd in the way that it warehoused merchandise in states where you only had to pay taxes on warehoused inventory on a yearly or quarterly basis.  Just before the audits, all the products possible would be shipped to the stores, so the inventory tax did not apply.  When they were through, they would re-distribute the products amongst the stores... creating sales on things you often wonder why the store bought them to sell in the first place... but they're stuck with them, low priced, and you buy it.

I do not mean to imply that KMART was the only one.  Don't take it out on them for this.

Besides, it was good business for them all.  Still, it was another loophole created to avoid taxation.  The year end sales aren't to sell product from the stores so much as they are to make space in the stores so the product in the warehouse will not be taxed.  After the sales, while you're watching the Super Bowl, diligent employees are counting what's left, and the store pays the tax at the local level.

What's more, a lot of these warehouse states or areas frequently have low corporate income tax as well.  So, let's say the tv is $100.  The warehouse charges the store $90, the store makes 10. Just enough to pay the expenses and keep the doors open.    And pay little income tax on their profits (if any) at the end of the year.

We're still talking about globalization :} Stay with this. Remember, look at the patterns.That's what's really important.  We're almost there.

There's always a critical point in any conversion from one system to the next when the new system starts to go online and the old system is being phased out.  Got keep all the data in the old system, but keep the new system updated too.  And it's very expensive.  And what do you do with the old assets afterwards.  Any computer network administrator can tell story after story of the calamity that occurs.

At a certain point, everything has to stop.  So you have the employees give it one more hard push to get data in so it can be transferred to the new system.  And then one weekend, you take the system down.

Then it's like being on the second floor of a building when someone is on the street giving away 100 dollar bills.  Everyone's moving in  one direction, afraid to deviate for fear of getting trampled,  keeping up with the latest trend or rumored instruction because you want to be sure you fit in.

So, imagine that you're a whiz at the old program they used to use, and know little about the new.  Suddenly, you have no edge, no reason for being paid more, valued more or even employed.  The upgrade paid for itself.

From a business perspective, it makes total sense.  Unless you measure loyalty as a measure of morale, leading to less theft and all the other things businesses look toward to enhance profits.

But businessmen don't think like that.  They take each process individually, measure the time it takes and the parts it needs, and projects it's productivity and earnings based on the ability to control costs.  It does not include morale as a necessary asset. I use the word morale to cover a lot of issues we won't go into here.

In the 90's, to facilitate the upgrades, the internet was used to attract a wide range of new investors, as well as a lot of money from the old investors to create a lot of dot com millionaires.  Most importantly, though, it created the facade of communications technology advancement and capital expansion to facilitate a type of "back door" inflation.

Just like the inflation of the 70's, large sums of money were made without a tangible product, and the sale of those products reaped more money, until the investment potential was used up, and the stocks began to crash.  The assets were sold.  Someone wins. someone loses.  Little in between.

In a nutshell, a corporation is nothing more than a trade agreement written on paper.    There is little personal interest in the survival of a large corporation.   It, and its assets are considered every bit as much a resource as the products and minerals it processes.  When it's job is done, whether by free-market pressure (lack of sales) or lack of usefulness, it's sold, liquidated piece by piece or scrapped... like buying a car for parts.

Then, they figure out what other configurations the machine fits into, and apply it there.

A machine like Enron was supposed to end up  being one of the primary energy managers of the world.  It's job was to assist in the development of energy policy in order to clear the way for implementation of  "them"'s plans to organize the world's resources and distribute them based on need to various regions as needed.    For the people.  So long as the people in the country, especially the governments, complied with the wishes of the managers.

Instead, it became more like a brokerage that, instead of providing for the public good and earning money for that product, it's purpose became a game called how to do you make more money.

That's very much what the fight about regulation was about in the first place.    Because corporations, after all, are run by people.  They can be swayed by money.  And they can lose focus on the job they do.  Like anything else, when you're doing something you're not supposed to do, it catches up with you, somehow, some way.

They did not fail, though, they failed more from a lack of cash flow (which may or may not have been a result of corruption). Supply and demand.  They just couldn't broker enough energy to generate enough cash until their next windfall, or the market stabilized.

It could not stabilize, however, because of insufficient power supply available causing rapid expansion of the market without product to sell, and no creation of new product... which pushed the prices up. There was no windfall to be had, because there was no product.

Cash flow scheme interrupted.  But that's sort of how it works.

Yet, in the Southwest, power insufficiencies will be a reality for quite some time, and quite profitable for many corporations.

There's a lot of  money made in a trade agreement written on a piece of paper, with no durability of its own.  When all is said and done, the paper is useless.   The important thing is the next configuration.

That brings us very close to the present.

The collapses of major corporations at this time is not actually that surprising.    When a company keeps it's books, there are basically 2 kinds of expenditures.    They are assets or expenses.

Buying property, say a building, is an asset.  It's durable, meaning it functions for a period of time that makes it a good investment over the "long" term... It can be resold, improved, and appreciate in value.  In the books, it does not show up as an expense.  It's handled as if it was a bank account.  And the expenditure is depreciated, meaning the expense is shown in the profit and loss over a period of years.

Expenses are things like employees, materials, anything that directly relates to the actual administration, labor, manufacture and distribution of products and services.

When you take the assets, expensed out over a period of years, and the direct expenses and mix them all together, you get what basically amounts to income averaging.  Then if you have windfall profits one year, the profit margin is reduced by the depreciation, or fuzzy math, so the profit margin is lowered, even though the actual expense written off actually occurred years before.

In bad years, the benefits are the same.  Profits appear lower, less taxes are paid.  But that sure explains why a corporation with low profits can afford such high salaries and bonuses.  Managing the books can make a business more profitable than selling a product.

What happened with Worldcom is that instead of recording direct expenses as expenses, they recorded them as assets, and hid their faltering profitability.

What's really significant... and this is my speculation... is that the corporations failing at this time is not necessarily an accident.  The trade agreement was over.    But the lack of regulation and loosening of accounting procedures over the last 2 years allowed an extension of operation for companies able to cash in on stock market declines by driving away stockholders without losing liquid assets, thus making the profits of liquidation more central to the owners of the preferred stock, typically the founders, CEO and/or board of directors.

Worldcom's assets are seemingly indispensable, and could easily be leveraged further in a new configuration.

Still, the single incalculable, unquantifiable factor in the conversion to the New World Order is people.  If the people do not cooperate, the plan cannot succeed.    This is the same area of  miscalculation made by Hitler.

Now, if you think that the recent problems of major corporations would end up being a problem in the Bush plan to cause younger people to abandon social security for the glamour of the stock market, it's not.  Read on.

PEOPLE

If you study what happened in Germany, it really comes down to a few things, when it comes to what happened with the people.

(see From Hitler To Saddam Hussein to Osama bin Laden - Insider Connections and the Bush Family’s Partnership with Killers of Americans)

It takes about 7 exposures to any given subliminal message for it to occur in your mind as a truth.  In other words, if I have a conversation with you and I want you to begin to understand my vernacular, I'll use key words, one at a time, and present them to you in a variety of contexts in order to cause your mind, which hears it all sub-consciously even if you don't hear it consciously, to cross reference it, and draw upon the memory of that subliminal message as an integrated concept.

The short version: if I say it to you enough times, you'll think of it like it's always been a valid thought, integrated into your feelings and opinions and general outlook of the world.  Or as they used to say before the art of propaganda was mastered "If you say it enough times, they'll believe anything".

How does this fit into a discussion of economics and globalization?

If you're a corporation or government, and you're going to provide goods and services to consumers, but it's expensive to transport them, so you have to train the people to do that part themselves.  Pass the cost directly to the consumer.  And that reduces administration of yet another thing.  Which increases company profits.

So, how do you retrain the people to do things a different way without causing people to worry about the fact that they're trying to control your behavior?  How do you make people rely less on the government, and turn to their themselves and their communities for solutions to problems that had previously been left to a central government?

Propaganda.  Subliminal messages. Conditioning our minds.  Cause us to turn to and rely on the one single truth we declare as a nation: the existence of God.

Now, I can argue in favor of the relevance of religious values in our country, in our lives any day of the week.  But I can not argue in favor of elevating my church leader to the position of representative to the corporate socialists.

see Bush Backs Religious Charity 7/2/2002

You might think that the recent problems in the Catholic Church would be considered a setback.  They're not.  After it's allover, and the church has cleaned out the riff-raff, they will be declared pure once again, and worthy of the absolute trust we are trained to give to our religious leaders.

When the fortune 1000 companies turn in their new profit and loss statements, they will be declared "pure" as well.  We will be told that everything's been fixed, that the reports are accurate, and we can proceed with the plan to do away with social security. And our young people will pour the proceeds of their labors into another boom market...

Until the next ingenious round of "back door" inflation.