Hiking Interest Rates Protects Financial Assets Of The 1% At Workers’ Expense

• by: C.J. Polychroniou

Gerald Epstein is Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst.

High inflation has returned after more than two decades of very low and stable inflation rates. While in the past, central banks were struggling to bring inflation up to a target of 2 percent, they are now confronted with the opposite task. Raising the interest rate is one way to combat inflation, which is why the Federal Reserve announced in mid-June its largest interest rate since 1994.

Will a hike in interest rates fix the real reason behind today’s inflation, which is now a global problem? What does the Fed rate hike mean for average workers and the poor? What other ways are there to combat surging inflation? And why do capitalist governments worry more about inflation than they do about unemployment or inequality? Progressive economist Gerald Epstein sheds light on these and other questions about today’s inflationary economy. Epstein is professor of economics and founding co-director of the Political Economy Research Institute at the University of Massachusetts-Amherst and a leading authority in the areas of central banking and international finance. He is the author of many books, including, most recently, The Political Economy of Central Banking and What’s Wrong with Modern Money Theory? A Policy Critique.

C.J. Polychroniou: In an attempt to combat high inflation, which rose in the U.S. by 8.6 percent in May, the Fed hiked its interest rate by three-quarters of a point. This is the highest interest rate hike in decades, but it wouldn’t be surprising if the Fed took even more aggressive actions in the months ahead as part of its war against inflation. How much of an impact can higher interest rates expect to have on inflation?

Gerald Epstein: It partly depends on how high interest rates are jacked up and how long they are kept up. In general, moderate increases in interest rates — say, 1 or 2 or even 3 percentage point increases — cause only small reductions in the inflation rate, which is defined as the percentage rate of increase of the price of a market basket (collection) of goods and services over a period of time. There are many reasons for this. For one thing, in the first instance, as Wright Patman, the populist congressperson from Texas in the 1950s repeatedly pointed out, increases in interest rates actually increase prices! The reason is that interest costs are, among other things, a cost of doing business for companies that borrow money to fund their operations. So, like wages, or gas or other costs, increased interest costs are likely to be passed onto customers by businesses that rely heavily on credit.

As for the price reducing impacts of interest rate increases — these occur only indirectly. The main channels are by raising the cost of borrowing by families for houses (mortgages), or credit card purchases, and by raising the cost of borrowing by companies that are planning to build new factories or buy new capital equipment. These reduce the demand for goods and services — houses, appliances, cars, new factories and capital equipment — and the workers that produce them.

It is the next step where possible reductions in prices and the rate of inflation comes in. Companies and workers are very reluctant to lower prices, or even to reduce the rate of increase of their prices and wages. So, what happens next depends on the power that workers and capitalists have to keep their wages and prices up — to wait out the reduced demand for their products and services until demand goes back up.

Typically, firms have a lot of ability to wait out the cutbacks without greatly reducing their prices. This is especially true when firms have a lot of pricing power if they are monopolies or have a big share of the market, as mega corporations often do. Workers, much less so. So as demand for products go down and unemployment goes up, we typically begin to see wages either go down or stop going up. Perhaps housing prices begin to slide or soften. Over time the inflationary pressures might subside.

But this can take a substantial amount of time. Estimates by well-known Yale economist Ray Fair, for example, indicate that a 1-percentage point increase in short-term interest rates reduce the inflation rate by one-half percentage point, but only after 15 months. So, as estimated by macroeconomist Servaas Storm, it would take a 4-percentage point increase in the Fed’s interest rate to reduce the inflation rate by only 2.5 percentage points — say from 6 percent to 3.5 percent — far above the Fed’s target of 2 percent. And the price tag for this modest drop in inflation would be an increase in the unemployment rate by 1.5 percentage points and a significant fall of GDP.

Even these weak anti-inflation impacts are probably an overestimate of the impact of interest rate increases on current inflation. The reason is that so much of this inflation is due to production disruptions outside the U.S. that increases in U.S. interest rates will have, at best, weak effects.

The libertarian economist Milton Friedman famously said that inflation is caused by “too much money chasing too few goods.” He assumed that the culprit here was “too much money” — typically printed by the Central Bank (the Federal Reserve in the U.S. case).

But, historically, most really serious inflations are caused by “too few goods,” not too much money: that is, serious disruptions in the supply of goods. Typically, these are associated with wars, droughts and political instability. And this is largely true with our current inflation. Read more

Deutsche Bank, Amsterdam. May 24, 2022. On Friendship / (Collateral Damage) IV

On Friendship / (Collateral Damage) IV
How to Explain Hare Hunting to a Dead German Artist
[The usefulness of continuous measurement of the distance between Nostalgia and Melancholia]

(September 2021 – December 2022)
A critical project concerning post-war artist Joseph Beuys.
Created by Joseph Sassoon Semah, curator Linda Bouws
May 24 2022, Deutsche Bank Amsterdam
De entree 195, 1101 HE Amsterdam

כיצד להסביר ציד ארנבות לאמן גרמני מת
[The usefulness of continuous measurement of the distance between Nostalgia and Melancholia]

Please remember, ‘Hare Hunting’ was a [codeword] euphemism for killing Jews by the Nazi troops during the Holocaust.
According to Jewish tradition, the hare is among mammals deemed not kosher, and therefore not eaten by (observant) Jews.

As will be clear, Jose[f]ph Beuys who always already surrounded himself by old Nazis has managed to promote himself as the (symbolic) Victim of the Third Reich in the (extended) territory of Post-Nazi West Germany.
Jose[f]ph Beuys who volunteered to sacrifice himself for the ideology of the Third Reich – succeeded to transform himself symbolically as it were, into the great healer of post-Nazi-Era, and with him, West Germany will cure itself.

Therefore, as a consequence of the need to further the authentic status of The Guest – The Guest was forced on 24 February 1986,
to correct the statement of Jose[f]ph Beuys’: “Wie man dem toten Hasen die Bilder erklärt / How to Explain Pictures to a Dead Hare” 26 November 1965. Since then, it should be read as follows –
” כיצד להסביר ציד ארנבות לאמן גרמני מת / How to Explain Hare Hunting to a Dead German Artist / Wie man einem toten deutschen Künstler die Hasenjagd erklärt”.

Finally, if the Guest is the symbolic Dead Hare, he may in the [end] has a Voice – in such a context obviously, the Guest’s conversation with the Dead German Artist changes in significance – because the words of the Guest already shifted to a certain power; That is the Guest’s / the Jew’s power to transform Jose[f]ph Beuys the ex-Nazi soldier from a self-made Victim to his original status i.e. the Victimizer.
Basically, we should remember that the actual transformation from a Victimizer to a Victim takes place in radical circumstances.
In our context, this implies that the transformation of post-war Jose[f]ph Beuys into a Victim took place in Post-Nazi West Germany;
Eventually, it would be tempting to say that the authentic Victim ‘The Guest’ i.e., The Jew, cannot be defined by his Victimizer.

Performance

Joseph Sassoon Semah with friends:

Baruch Abraham
Masja Austen
Peter Baren
Bülent Evren
Jom Semah

Camera & editing: Bob Schoo, http://www.n-p-n.info

© Stichting Metropool Internationale Kunstprojecten 2022

Noam Chomsky: The “Historic” NATO Summit In Madrid Shored Up US Militarism

Noam Chomsky

On June 28-30, 2022, NATO leaders gathered in Madrid, Spain, to discuss the major issues and challenges facing the alliance. The summit ended with far-reaching decisions that will have a dire impact on global peace and security. Hailed as “historic,” the summit was indeed transformative: NATO produced a new Strategic Concept and identified what it says are the key threats to western security, interests, and values — none other than Russia and China.

“The empire doesn’t rest,” quips Noam Chomsky, a public intellectual regarded by millions of people as a national and international treasure, in his assessment of NATO’s “historic” summit in the exclusive interview for Truthout that follows. Chomsky is one of the most widely cited scholars in modern history. He is institute professor emeritus at MIT and currently laureate professor of linguistics at the University of Arizona, and has published more than 150 books in linguistics, political and social thought, political economy, media studies, U.S. foreign policy and world affairs.

C.J. Polychroniou: Noam, as was expected, the war in Ukraine dominated the recent NATO summit in Madrid and produced some extraordinary decisions which will lead to the “NATO-ization of Europe,” as Russia was declared “the most significant and direct threat” to its members’ peace and security. Turkey dropped its objections to Finland and Sweden joining the alliance after it managed to extract major concessions, NATO’s eastern flank will receive massive reinforcement, additional defense systems will be stationed in Germany, Italy, and elsewhere, and the U.S. will boost its military presence all across European soil. Given all of this, is it Russia that represents a threat to Europe, or NATO to Russia? And what does the “NATO-ization” of Europe mean for global peace and security? Is it a prelude to World War III?

We can dismiss the obligatory boilerplate about high principles and noble goals, and the rank hypocrisy: for example, the lament about the fate of the arms control regime because of Russian-Chinese disruption, with no mention of the fact it is the U.S. that has torn it to shreds under W. Bush and particularly Trump. All of that is to be expected in “historic” pronouncements of a new Strategic Concept for NATO.

The Ukraine war did indeed provide the backdrop for the meeting of NATO powers — with bitter irony, just after the conclusion of the first meeting of the states that signed the Treaty on the Prohibition of Nuclear Weapons (TPNW), which passed unnoticed.

The NATO summit was expanded for the first time to include the Asian “sentinel states” that the U.S. has established and provided with advanced high-precision weapons to “encircle” China. Accordingly, the North Atlantic was officially expanded to include the newly created Indo-Pacific region, a vast area where security concerns for the Atlanticist powers of NATO are held to arise. The imperial implications should be clear enough. There’s a good deal more to say about this. I will return to it.

U.S. policy toward Ukraine and Russia was strongly affirmed in the Strategic Concept: no negotiations, only war to “weaken Russia.”

This has been steady policy since George W. Bush’s 2008 invitation to Ukraine to join NATO, vetoed by France and Germany, who agreed with high-level U.S. diplomats for the past 30 years that no Russian government could tolerate that, for reasons too obvious to review. The offer remained on the agenda in deference to U.S. power.

After the Maidan uprising in 2014, the U.S. began openly to move to integrate Ukraine into the NATO military command, policies extended under Biden, accompanied by official acknowledgment after the invasion that Russian security concerns, meaning NATO membership, had not been taken into consideration. The plans have not been concealed. The goals are to ensure full compatibility of the Ukrainian military with NATO forces in order to “integrate Ukraine into NATO de facto.”

Zelensky’s efforts to implement a diplomatic settlement were ignored, including his proposals last March to accept Austrian-style neutralization for the indefinite future. The proposals, which had indications of Russian support, were termed a “real breakthrough” by UN Secretary-General António Guterres, but never pursued.

The official Russian stance at the time (March 2022) was that its military operations would end if Ukraine too were to “cease military action, change its constitution to enshrine neutrality, acknowledge Crimea as Russian territory, and recognize the separatist republics of Donetsk and Lugansk as independent states.”

There was a considerable gap between the Ukrainian and Russian positions on a diplomatic settlement, but they might have been narrowed in negotiations. Even after the invasion, it appears that there may have remained some space for a way to end the horrors.

France and Germany continued to make overtures toward diplomatic settlement. These are completely dropped in the recent Strategic Concept, which simply “reaffirms” all plans to move toward incorporating Ukraine (and Georgia) into NATO, formally dismissing Russian concerns.

The shifts in the European stance reflect Europe’s increasing subordination to the U.S. The shift was accelerated by Putin’s choice of aggression after refusing to consider European initiatives that might have averted the crime and possibly even opened a path toward Europe-Russia accommodation that would be highly beneficial to all — and highly beneficial to the world, which may not survive great power confrontation.

That is not a throw-away line. It is reality. The great powers will either find a way to cooperate, to work together in confronting imminent global threats, or the future will be too grim to contemplate. These elementary facts should be kept firmly in mind while discussing particular issues.

We should also be clear about the import of the new Strategic Concept. Reaffirming the U.S. program of de facto incorporation of Ukraine within NATO is also reaffirming, unambiguously, the refusal to contemplate a diplomatic settlement. It is reaffirming the Ramstein declarations a few weeks ago that the war in Ukraine must be fought to weaken Russia, in fact to weaken it more severely than the Versailles treaty weakened Germany, if we assume that U.S. officials mean what they say — and we can expect that adversaries take them at their words.

The Ramstein declarations were accompanied by assurances that Ukraine would drive Russia out of all Ukrainian territory. In assessing the credibility of these assurances, we may recall that they come from the sources that confidently predicted that the U.S.-created Iraqi and Afghan armies would resist ISIS [also known as Daesh] and the Taliban, instead of collapsing immediately, as they did; and that the Russian invasion would conquer Kyiv and occupy Ukraine in three days.

The message to Russia is: You have no escape. Either surrender, or continue your slow and brutal advance, or, in the event that defeat threatens, go for broke and destroy Ukraine, as of course you can.

The logic is quite clear. So is the import beyond Ukraine itself. Millions will face starvation, the world will continue to march toward environmental destruction, the likelihood of nuclear war will increase. Read more

DJDEBOERHUISARTS- Balth. Floriszoonstraat 23, Amsterdam

July – September

10 July 2022, 17.00 hrs.

A talk between David de Boer and Joseph Sassoon Semah –  A performance ‘Display of the Wound’, Joseph & Friends

Excerpt – from a letter written by Joseph Sassoon Semah to Albrecht Dürer 1986 …Please remember, such an order – [ Jose[f]ph Beuys “Show Your Wound ] “Zeige Deine Wunde  – from a German [ex] Nazi soldier to a certain Guest is not innocent, and the Guest always knows what will become of this quest;
Because as it is, there is always a risk following the showing of the wound of BRIT – MILaH, בְּרִית מִילָה [Covenant of circumcision] in the Extended Territory of Jose[f]ph Beuys;
After all, one cannot forget the devastating actions of Nazi Germany upon the Guest’s בְּרִית מִילָה [Covenant of circumcision] – There is no secret here, the Guest’s authentic healed wound is already buried, in the ground of the extended territory of Jose[f]ph Beuys…

Vol vertrouwen

• door: Auke van der Berg

‘Heb jij ook een goed weekeinde gehad?’, vraag ik het meisje bij de bakker.
Ze lacht wat verlegen.
‘Ja’, zegt ze, ‘misschien een beetje een stom verhaal. Een paar vriendinnen lachten me uit toen ik het vertelde.’
Ze aarzelt even.
‘Zaterdag zag ik een lieveheersbeestje drijven in het waterbakje van mijn katten. Toen ik goed keek, zag ik ineens een pootje bewegen. Ik heb het beestje er voorzichtig uitgehaald. En heb wat suikerwater gemaakt en op mijn arm gesmeerd. Al vlug begon ze ervan te eten. Om de paar uur heb ik haar zo gevoerd. Ze bleef heel rustig zitten, ook als ze genoeg had gehad.
Zondag zag ik dat een vleugeltje gebroken is. Dus blijf ik haar maar voeren. Tot ze weer kan vliegen. Zij slaapt nu zelfs op mijn arm.’
Ze glimlacht bij de gedachte.
‘Toen ik gisteravond thuiskwam, leek het wel of ze blij was dat ik er weer was. Ging heel rustig op mijn hand zitten. Of liggen. Vol vertrouwen.’

NATO’s Expansion And New Strategic Concept Broaden The Prospect Of Armageddon

• by: C.J. Polychroniou

CJ Polychroniou

A bleak future lies ahead.

The 2022 NATO (North Atlantic Treaty Organization) summit, which was held in Madrid, Spain, from June 28-30, has produced a new strategic concept for an alliance which only a few years ago was declared “brain-dead” by French President Emmanuel Macron that will define its future for the next ten years.

Indeed, thanks to Russian President Vladimir Putin, the world’s largest military alliance has made a comeback, and with a vengeance. Russia has once again become its main target. The new strategic concept names it as the “most significant and direct threat to the security of allies and to the peace and stability of the Euro-Atlantic area.”

Countries with a long history of neutrality, such as Finland and Sweden, will soon be joining NATO after Turkey dropped its opposition. NATO will add 1300 kilometers more of border with Russia. Since 2016, NATO also has an “enhanced forward presence” in Estonia, Latvia, Lithuania, and Poland.

The western encirclement of Russia, which loomed large both before and after the 1917 Bolshevik revolution and has continued with the same zeal even after communism had collapsed, is now virtually complete.

This is a development with staggering implications for international peace and security. NATO was of course a source of instability and a threat to international peace and security throughout the Cold War as it was a central instrument to the US imperial project. With its eastward expansion following the dissolution of the Soviet Union, NATO’s role in restoring America’s unipolar world hegemony sowed the seeds of mistrust between Russia and the western powers and set the stage for the renewal of a protracted conflict, reminiscent of the Cold War.

The U.S.-led and western-centric alliance bears a great deal of responsibility for the ongoing tragedy in Ukraine. Many top foreign relations experts had predicted that NATO’s eastward expansion was a move that would eventually provoke a hostile Russian reaction. Russia had been warning the west about NATO expansion for decades.

In September 1993 Boris Yeltsin send a letter to Bill Clinton in which he warned that an enlargement of NATO might be interpreted by Russia as a national security threat.

“We believe that the eastward expansion of NATO is a mistake and a serious one at that,” Boris Yeltsin, Russia’s first post-Soviet president, told reporters at a 1997 news conference with US President Bill Clinton in Helsinki, where the two signed a statement on arms control.

At the Madrid summit, NATO leaders agreed to a new strategic concept for the alliance that will make the world even more dangerous than it is now. But before we delve into what NATO’s new strategy means for world order, let’s briefly recall the history of the U.S.-led military alliance.

NATO was created in 1949 by the United States and 11 other western nations with the stated objective of acting as a deterrent to an invasion of western Europe by the Soviet Union.

Of course, there was no Soviet military threat. Stalin had no intention of invading western Europe. He was a ruthless tyrant in charge of a police state that he had built, almost single-handedly, but his approach to foreign policy was not driven by ideology but rather by the dictates of Realpolitik. He was an ultra-realist, having no desire for a military confrontation with the Americans and the British on the continent.

“I can deal with Stalin. He is honest—but smart as hell,” Harry Truman wrote in his diary entry dated July 17, 1945, the first day of the Potsdam Conference in Germany.

Indeed, Stalin’s geostrategic approach was not geared towards the export of a revolutionary ideology. “The export of a revolution is nonsense,” he pointed out in a 1936 interview given to Roy Howard, president of the Scripps-Howard Newspapers. Stalin’s primary concern was the security of the Soviet Union. His interest in having Eastern Europe under his thumb was for the purpose of creating a buffer zone between the West and the Soviet Union.

The Soviet Union lost as many as 27 million lives during the Second World War, half of her industry, and thousands of villages, towns, and cities were destroyed. That’s the price that it paid for saving the world from Nazi Germany. To be sure, it would be good to remind western readers that “four-fifths of the fighting in Europe took place on the Eastern front, and that’s where Germans suffered virtually all of its casualties,” as Rodric Braithwaite, former British Ambassador to the Soviet Union/Russian Federation accurately stated during the course of a lecture that he delivered on June 13, 2005, at Kennan Institute.

For all the above reasons, the mere suggestion that Stalin might have any intention of embarking on wild military adventures to conquer Paris or London should have been rejected as utterly ridiculous by any rational policymaker at the time, but obviously that wasn’t the case. Take, for instance, the attitude of an anticommunist reactionary like Winston Churchill. His pathological hatred toward the Soviet Union was so intense that even with Operation Barbarossa well under way, and the Soviet Union on the verge of collapse, it was communist Russia, not Nazi Germany, that he considered as the barbaric antithesis of western civilization. “It would be a measureless disaster if Russian barbarism overlaid the culture and independence of the ancient states of Europe” he wrote to Anthony Eden in late 1942.

As stated earlier, NATO’s explicit purpose was to “deter Soviet aggression.” But the creation of NATO had another goal, though it was never mentioned either by NATO leaders or foreign policy experts and commentators. The goal was to cement western Europe’s position in the capitalist world economy with the U.S. at the helm. A year earlier, the Marshall Plan had been introduced, whose purpose was to prevent the spread of communism in western Europe, stabilize the international economic order, and provide markets for U.S. goods. By integrating European countries into NATO, the U.S. was seeking to safeguard its investments in the European economies. In other words, NATO was also seen as a bulwark against radical political change inside different European countries. It was a way to ensure that their future is tied to the capitalist world order. Read more