Wednesday, March 9, 2011

What would a Marxist Revolution look like in the United States?

"This ruthless operation to liquidate the inglorious inheritance of the Sun King was carried out quickly and efficiently in the course of 1716 by a secret committee known as the Visa. At the same time the law courts brought to trial about 8,000 persons who had been involved  in some ways with the finances of the late king's reign: over half of them were convicted and either fined or condemned (to death, prison or the galleys) for fraud and malversation."

from The Emergence of Modern Finance in Europe 1550 -1730 by Geoffrey Parker as quoted  in
The Fontana Economic History of Europe "The Sixteenth and Seventeenth Centuries"  Editor Carlo M. Cipolla, @1974

"America is not broke...The country is awash in wealth and cash. Its just that its not in your hands. It has been transferred in the greatest heist in history from the workers and consumers to the banks and portfolios of the uber rich. Right now... four hundred obscenely wealthy have more cash, stock and property than the assets of 155 million Americans combined...For us to admit that we have let a small group of men abscond...with the bulk of the wealth that runs our economy, would mean that we would have to accept the humiliation that we have surrendered our precious democracy to the monied elite..."

Michael Moore in Madison, Wisconsin, March 5, 2011

It is commonly believed that the middle class in the United States has become too infantilized/narcotized to attempt a Marxist revolution. Yet, the previous century incurred much revolutionary activity originating from labor, class, and racial discord.  Could this discord repeat and expand across the states?  Tonight the Republican state senators in Wisconsin eliminated collective bargaining for Wisconsin's public sector unions, overriding the objection of the lone remaining Democrat state senator who had not skipped town. Will the union movement in America kow-tow to this heinous legislation? Most probably not. Let us mock out a scenario from this moment forward, presupposing tonight becomes "the shot heard round the world" that leads to state by state revolts against governmental authority and  thus destabilizes the Republic.

There are several significant background processes to note. First, the states are running out of cash. So are their cities. The flow of municipal funding has dried up. Second, stimulus monies from Federal Government will all but be spent by Q4 2011. QE III, should it arrive, will probably do no more to stimulate employment (or the transfer of wealth) than QE I or QE II.  Last, the Republican congress will block further taxes on the wealthy and support for the states. From this point on, all it will take to light the fuse maybe something incidental, like $5.00 per gallon gasoline. How this will all play out, I do not know. But I expect that nation wide strikes may lead to various types of violence and crime, followed by attacks on critical infrastructure, followed by a swift martial response (in a futile attempt to maintain order), followed by an even larger civic protest.  At this point, gross market disruptions will occur: interstate commerce and transportation will be balkanized, banking communication will suffer outages, state militias will be deployed and the President will have to respond.

What will happen next may rule the fate of  near history. Clearly, the President is going to have to ask for calm from the faithful, knowing that in a country with one of the highest rates of gun ownership in the developed world and a broken and near paranoid middle class, this could be a futile request. Wealth will no doubt exit the U.S. to safe havens, complicating the President's ability to restore order.  Some states may deploy onerous form of emergency/martial law.  Unfortunately for the President, the rest of the world may weigh in, if they are not already in some manner doing so.  Globalization has produced unique alliances. In a world where a thirty year old Google Engineer helped start the Egyptian Revolution on Facebook....

It is not historically unusual for violence to follow large scale economic displacement or "bubbles". It's just that...we've never really seen this is a world that currently has nearly 600 T of outstanding notional derivatives. Hang onto to your hats, because your retirement funds may well be worthless very shortly.  If the President is paying attention, he knows that this crisis may become an opportunity.  How he uses this opportunity may well define his Presidency.

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