Growth Crisis in Global Economy Censored Beneath US Election Fever

Almost Midnight for the Petroleum Presidency

Readers familiar with this blog won’t be surprised to read our latest headline. With election fever in full swing, the commercial media has repeatedly framed the choice for the president as if the most pressing upcoming policy decisions on the US economy are well within the control of the White House. True, the President will contribute to difficult policy choices about the “fiscal cliff” and income taxes, both of which may or may not have crucial consequences for job creation, social programs, and corporate profits. And true, the difference between President Obama and Governor Romney on social issues like women’s health speak to large difference between the two men. The executive branch has uniquely disproportionate power over the Supreme Court, too, given the issues that get decided by partisan priests.

But as we saw with the complete absence of the phrase “climate change” during the presidential debates, the most profound issues affecting the future just do not get discussed with anything like the urgency they require, in part because the current US political system is exclusively dependent on continued growth in a global economy run on oil and supplied by oil cartels. Whatever happens with the critical new explorations in the Arctic or the Keystone pipelines, the corporate media cannot admit any thought outside the paradigm that privileges that infinite-growth expansion over the sustainability of the biosphere. And the problem there is that a majority of Americans still get their sense of priorities from the assemblage of stories programmed by corporate website and television editors.

It’s therefore possible that the US political system will not prevent further climate catastrophes until the rhythm of storm destruction reaches apocalyptic dimensions. New York Governor Andrew Cuomo and New York Mayor Michael Bloomberg can sink $20 billion into sea gates, subway pumps, and levees – but will their followers sink $20 billion into infrastructure after each subsequent, more powerful storm? The question of rebuilding the Lower Ninth Ward in New Orleans after Hurricane Katrina is a microcosm of the overall problem facing every coastal neighborhood on the planet.

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We argue that this paradigm is emotionally and practically accompanied by a near-mystical belief that the White House actually has the power to shape the fundamental factors responsible for the US economy, as if that economy could be un-plugged from the debt riots in Europe or the three trillion in capital flight from China. How many Americans have seen those stories on cable news? Or how about the notion that investor-owned corporate cartels in finance, energy, and pharmaceuticals have more collective power than the US president, even when their interests aren’t always aligned by party? Such talk is the heresy of modern life. No, there isn’t a secret cabal running the world: there are hundreds of mostly public ones doing it, from China’s state owned-corporations, to the Russian oligarchs, to the US oil majors.

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The overlaps in elite agendas shape daily life as profoundly as their disagreements over income taxes. Coke and Pepsi compete for market share, but they share seats on corporate board directorships that interlock their companies together, which is why each can support corporate lobby groups like the Chamber of Commerce and, until recently, the Koch brothers legislative machine lobby called ALEC . And as we saw with the emails over Obama’s health-care negations, the president mostly stayed out of it while his advisors negotiated deals with corporate lobbyists. Anyone mention those at the debates? Oh, that’s right: similar deals were cut by Romney’s team earlier in the decade. Silly us.

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On other incredibly important issues related to the economy, the president’s responsibility is one most visible during moments of crisis management; he has to cloak a tribute system driven by investor returns in the fiction that the economy itself is an “effect” of a “free market.” He must then claim to create millions of small opportunities for voters disconnected from the elite patronage networks that funnel wealthy college graduates into well-paying corporate jobs, or deny that his inability to do so stems from his policies. Such is his concern for the holy middle-class job seeker, who is also the fickle consumer at the heart of US elections – they are as much the “products” of the system as the president himself. Meanwhile, just a few finance firms bet cheap Fed money against complex financial instruments tied to developments in the “real” economy that those firms can sometimes influence. As one Barclays bank trader said to another about rigging American energy prices for profit, “I totally fucked with the Palo market today!” Can the president do that? Did that come up on cable news?

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Just as he can’t create millions of dollars for his family and friends by rigging energy prices, the president cannot change the fundamental forces affecting global economic growth for investors. He can possibly ease their tax burden, but to do so means he engages with the premise that investor wealth stems from moral and intellectual intelligence, and not from the casino-like house rules of the finance industry, where a Fed-led Ponzi scheme of low interest loans structures a pyramid of debt extending from the richest banker to the hourly retail worker. Yes, the global economy is more complicated than huge amounts of capital loaned at 0% that’s then re-loaned at 2%, and then that capital at 4%, and then that capital at 6%, and then at 12%, and then at 18%, and all the way out to the 28% “payday” stores run by corporate loan sharks and pawn shops. But consider this: if you removed that Russian doll-like model of capital extraction from the largest Fed-connected firms, like Goldman Sachs, there would be another political system in place already in the United States, because the great finance firms of the 20th century would have gone bankrupt in 2008 and 2009.

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The Day After Tomorrow Was Yesterday

On that note, the power of central bank monetary policies and the now routine catastrophes in the collapsing biosphere dwarf any power of the president to change the basic infinite-growth formula that runs the main programs of global capitalism. He can only react to the chaotic “black swans” of the inevitable system failures brought on by those formulas, when the algorithm must move the decimal over a few steps, usually in the direction of sucking more capital from the ATM-machine of public debt – what we now call austerity and privatization, and what Naomi Klein calls disaster capitalism. If austerity doesn’t work, then it’s necessary to make the planet provide cheaper energy (below, see the drilling areas opened by President Obama in his first term). Meanwhile, the consequences for the planet of rapid and infinite economic growth aren’t ever addressed. Indeed, the context of policy decisions generally are fully enclosed within what’s called the “bounded debates” of an ad-driven corporate media. Infamously, for example, in the second debate both candidates bragged about which had drilled for more oil. Then Sandy came. Imaginations shouldn’t have to always be pried open during crises.

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The hurricane didn’t change the obvious glitch in the political system related to systemic crises such as climate change: both candidates are reduced to diddling over whose short-term, five-point-plan will stoke more job growth, but neither can say where long-term growth will come from, and neither can they vouch for the ecological wisdom of creating more jobs dependent on the lethal oil infrastructure warming the planet’s oceans and atmosphere. On this subject, as with many others, the candidates will spend the next year consulting a network of think-thank consultants and weigh proposals against the agenda of rich donors and corporate clients. In the meantime, here in Brooklyn miles of idle cars snake up the city’s arteries; on Bedford Avenue, men in heavy coats wait to fill up red plastic containers under the watchful gazes of the NYPD officers.

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Sure, the President’s utter lack of ability to change the fossil fuel architecture of the US economy is a reason to criticize him. Or maybe it’s part of a broader acknowledgement about his basic impotency on the issue. The only thing worse than imagining the guy from the other party in the White House is realizing that neither has any sacred power because of the electric pageantry surrounding the election. It doesn’t help that there appears to have been no Manhattan Project for energy, or a federal research program, or something to transition to renewable energy. But after Sandy, it should be spit-obvious to everyone that the US political system can no more alter the economic foundations for climate change than the Russians can produce a post-oil economy.

The other future never arrived. The solutions are going to be local, haphazard, and improvised. Governor Cuomo can’t control carbon pollution in India – and therefore can’t prevent storms worse than Sandy from overwhelming the New York City subway. He’s just one of the few political elites now personally grappling with the choices made by his generation of finance wizards. It’ll be more interesting to watch his buddies slide back into denial than to wait for them to climb aboard plans that require higher taxes on their boats. Or maybe he didn’t get the memo on the Long Emergency.

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Ratifying the Unitary Executive

The country’s stalemate on climate brings us back to our best guesses about what the president can do. One thing he does is wave the magic legal wand of executive power. It’s sad for curious people that the most fascinating aspects of the unitary executive are left to peculiar screenplays about CIA heroism, and not insider stories about how presidents govern the huge limbs of the executive branch completely insulated from elections and democracy (why didn’t Ben Affleck direct a film about the 1954 CIA overthrow of the democratically elected Iranian President? Oh, that’s right!).

It’s evident that much of the real ‘hard power’ of the presidency is shrouded in secret authorizations to US intelligence agencies, who conduct any number of global and domestic operations in the name of national security, many of which we know nothing about, and with nothing like democratic oversight – unless one counts sometimes secretly briefing Congressional leaders as oversight. Gary Wills’ book Bomb Power provides a terrific story on the history of the rise of the US national security state, one that Eisenhower famously warned about on national television. The historical revolving door between intelligence agencies, the military, Wall Street, and corporate boards of directors could fill a college textbook, but the class really can’t be taught, at least not for a few decades. The paradigm of national security, after all, is sacred stuff, because the gods it conceals are the angry kind — the kind that sacrifice our young.

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No matter how much evidence scholars and journalists collect on the ambiguous behavior and funding of black ops, the commercial media and professional journalism refuse to call out for legal solutions to what seem to be some serious crimes of conscience. Drone strikes are 21st century American exceptionalism in practice, and Obama’s fevered supporters shrug them off with a “done his best” complacency utterly alien to, say, the protesters against Vietnam. The “pass” on drones is set by the media news cycle, where no public mention can be made, either, of the enormous link between intelligence agencies and the global agenda of particular corporate firms. Seen from the perspective of the CIA, a Romney victory would have meant new management, but at the same company; the main objectives don’t change. There isn’t a presidential candidate on the planet that would refuse the basic mission of the agency and its brothers, like the NSA, even if he might refuse to sign off on a mission here or there. For them, the job of the executive is to legalize black operations and other delicate breaches of the Constitution and international law.

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The success of cloaking all these issues in fundamentalist vocabularies of “security,” “patriotism,” and “terrorism” just point to the obvious ways that nationalist rhetoric stops other kinds of conversations from happening. It takes some special forms of emotional intelligence, too, to forgive the authorizations of the president just because he belongs to one party or another. The fact that party membership changes attitudes on the ethical use of secret para-military operations is fairly astonishing. It might be wise for us to spend some time reflecting on the ways that abstract concepts of “USA” work so effectively to halt any sustained moral and legal inquiries into the ethics of presidential power.

Consider the relatively well-documented stories on the CIA and crack cocaine, the biggest of which is Iran-Contra. Once we admit deception on that scale, what else is possible? In response to any number of rational investigations into inconvenient facts on any number of subjects, liberal apologists like to argue that large organizations can’t keep secrets, so there really can’t be “true” conspiracies. Yet the daily success of intelligence operations — not to mention the actions of private corporations – consistently gestures to the power of disclosure agreements on the one hand, and self-interested career-ladders on the other. But even on a third hand: so many scandals appear so frequently – remember Wikileaks? – that the real difference between scandal or forgotten story is whether or not the purported crime fits someone’s career agenda in the district attorney’s office. So-called conspiracy theories will naturally emerge when you have incredibly complex and powerful paramilitary organizations able to act everywhere with complete legal immunity, and who can pursue objectives for agency directors with personal ties and experience to global corporations. The president is the man who purifies their goals with the blessing of Commander in Chief.

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We can see the absurdity of this theme in the circus of accusations surrounding what President Obama knew and when during the Benghazi embassy riot. What no one questions in the least is what the CIA officers were doing in the safe house down the road from the embassy. No one questioned whether or not the president had the authority to assassinate Osama bin Laden and dump his body in the ocean, either. One doesn’t have to get lost in the emotional gravitas of bin Laden’s death to take some serious steps backward and look at the situation as a whole, from the perspective of a disinterested and quizzical future. From there, one can imagine there will be louder and more important voices than those in the commercial media that question why bin Laden wasn’t brought to trial.

But that may take a decade or two, when no one feels like dancing in the streets anymore. A main point to remember is why the CIA needed a public narrative about President Obama making the “call” in the first place; it goes beyond claiming a trophy for his re-election. It’s fair to ask whether or not that “call” is part of a strategic public narrative that’s representative of the executive-CIA relationship, or whether or not it’s actually an exception. If it is representative, what does it mean that the US concentrates such enormous political and legal power into one person, and that this same person also runs around claiming he can alter the fate of the global economy?

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“Quantitative Easing” Suggests True Scale of Growth Crisis

In truth, there are enormous emerging crises in the global economy that President Obama will have limited powers to negate. These crises beg structural questions about the nature of infinite economic growth and the range of opportunities any president would have in a world of escalating energy costs. We can see the structural problems with the fundamentals of an expanding capitalist economy in the continuity between the Bush and Obama administrations on foreign policy, but also in Obama’s acquiescence to Fed Chairman Benjamin Bernake’s decision to create cheaper and cheaper forms of capital for banks to re-sell. This utterly experimental monetary policy is symptomatic of an economy that cannot find returns from real fundamental growth, and so, incredibly, the policies must make capital cheaper to create. In other words, the Fed must supply financial firms with cheap sources of capital because those firms cannot make large enough returns on the capital they traditionally lend. The Fed has said this policy is never-ending until the economy “recovers,” but the law of unintended consequences could easily suggest that the policy itself is preventing the “real” recovery – the one where the banks fail and “we the people” reinvent the world.

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For example, the US Federal Reserve is now buying $40 billion dollars worth of mortgages a month, despite already controlling over $1-2 trillion in mortgage-backed securities. We haven’t heard whether or not this makes the Fed the nation’s single largest land-owner in the US yet, but they’ve got to be close, at least on paper. The hundreds of billions in extra liquidity created by the cartel of global central banks in the past have arguably had much more powerful effects on job creation – and corporate profits – than anything President Obama has done in the past four years. The chart below makes the point despite being out of date. Did this come up in the debates? Is this part of the president’s new mandate?

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The shocking scale of the Fed’s intervention into the economy rests uncomfortably behind all the strained accusations that give Americans the idea that president’s policies “succeed” or “fail.” Yet the unbelievable liquidity pumped into capital markets has created billions of dollars for firms and investors close to the magical center of the Fed’s capital hose. For example, conversations that try and discuss annual $1 trillion in US deficit creation during President Obama’s first term, or his $767 billion dollar stimulus, or his auto-bailout without mentioning the $7 trillion the Fed lent to the big banks to bail them out from almost-certain collapse are simply not credible. Or, put another way, they reflect the limited discourse of cable news debate.

There’s a place for those conversations in the corporate media wormhole because they help decide the reality-tv drama of the elections, but such discussions will have limited predictive powers about the future, since they fail to address the systemic crises taking place in the global economy. Anyone who reads the Financial Times on a daily basis can tell you that there are trillions of dollars moving through the money markets, hedge funds, sovereign bond auctions, private equity firms, and offshore tax shelters every quarter. The public debt crises and austerity cuts are absolutely impossible to understand as issues of actually-existing shortages of capital. When central banks can print brand new capital and hand it to global banks, we have to understand their refusal to give that capital to average people, including the poor, as a political decision. And what kind of political system is that, Anderson Cooper?

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Crowd Control and Managed Collapse

The real crisis in the global economy is one of capital surplus and investment returns: the central banks have produced too much liquidity to sustain returns for all of the current generation of investors and money managers. We’ve all read about the slowing growth in China and the potential for a “hard landing,” and whether or not slowing growth will set off even more violent riots than the ones we’ve seen this year. We’ve read about the on-going crisis in India, whose growth has fallen off a cliff, and the somewhat questionable faith financial experts have now put in their US-educated technocrats trying to privatize the economy for global firms. Brazil’s growth declined almost immediately when China’s cooled, since they, like Australia, really only had natural resource exports to offer China’s central-bank fed property bubble. Russia proved unable to open its political institutions to the urban middle-class, as we saw when they crushed the nascent protest movement with the Pussy Riot kangaroo trial. That trial was part of Russia’s managed collapse: there isn’t going to be any tolerance for middle-class professionals to claim any new slice of the shrinking pie of fossil fuel revenues.

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Along with slowing economies have come new methods of crowd control; when people want new powers after their dreams die, they have to be crushed, too. The struggle for growth in China and Russia has completely over-shadowed any leftover liberal illusions about the moral power of capitalism to reform autocratic regimes. After reading about China and Russia’s responses to their respective democracy movements over the past 18 months, one feels rather embarrassed for the post-communist ivy-league theories that suggested market liberalization and crony capitalism would inevitably give way to free speech, an educated public sphere, and human rights. Those dubious utopian ideas are being rethought by a new generation of academics. Though one wouldn’t know it from business classrooms along the east coast, it’s pretty funny to watch capitalism’s academic champions continue to excuse the destruction of democracy in the name of some enlightened “progress” to come. Those gods of global economic growth really must be angry gods, because it’s quite clear they demand serious and regular sacrifices from people begging to speak their own minds. This, too, is managed collapse.

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To anyone watching the crowds emerging from every capital on the globe, it should be obvious that there is no real functioning global economy without these new methods of crowd control. The “stability” so sought out by investors has already prevented the turnover of governments in places thick with the necessary resource inputs of global supply chains; Bahrain’s declaration of martial law wouldn’t be happening if the US Fifth Fleet wasn’t based there to protect the flow of oil from the possibility of an Iranian intervention, no matter what The New York Times reports from its anonymous sources inside the Obama administration (“the Saudis would be doing this anyway.” Yay political realism!). The management of the Bahraini dictatorship by the US and the Saudis is instrumental to the regime’s lethal use of force against protesters, including children. But this is just another narrative left out of the US elections, save the feckless white flags of The New York’s Times articles riffing on the “uncomfortable questions about American support for Bahrain’s monarchy.”

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It’s also becoming painfully clear that countries like China and Russia cannot return to their old growth rates, despite being core representatives of the Goldman Sachs branded “BRIC” economies so vital to the future of global growth during the pre-collapse era. This is being spun as positive news by economists who insist like clockwork that China, for one, needs to become a consumer economy and not a land of cheap exports for US corporate supply chains. Yet even this logic misses the point: the great gods of consumerism can’t save the future of the Chinese economy, either, since consumer economies don’t grow as fast, and the Chinese political system can’t survive another few slips of GDP in its current form. The United States has found out, too, that once you go consumerism you can’t really go back to manufacturing – consumerism is dependent on cheap manufacturing wages in producing countries and on higher real incomes in service jobs to buy the cheap goods.

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As Chinese wages rise higher to give Chinese consumers more purchasing power, Chinese factories will become less and less productive, requiring those factories to leave the country in search of cheaper workers. This will create short- and medium-term disruptions to Chinese employment, straining the political system. This is already happening. It’s possible that the chaos of this transition conceals the possibility of on-going contraction. Furthermore, part of the reason for the near constant riots in China is that Chinese wages are not keeping up with GDP growth as a whole, since the majority of gains made have been by Chinese elite – many of whom recently left the country with trillions. There is rising anger among those that were left out of the growth years, and resentment toward the elite that hoarded the profits of the nation without reforming the political system.

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The most challenging factor to continued global economic growth, however, is that none of the BRIC countries or the US-EU Atlantic countries have invented new forms of energy or technology that might lead global capitalism into a new decade of innovation. Neither China nor Russia invented an industry the way that Silicon Valley created one around the internet. In fact, looking at them now, with all the financial shine sliding off in the slime of elite corruption, one senses that their economies were, at heart, interlinked financial bubbles tied to urbanization. With China’s real economy likely only growing somewhere between 5-7%, there isn’t a country on the planet with the potential to pull the global economy into anything like the 3% growth most economists felt was key to sustainable returns on capital investment.

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Crucially, high energy prices have put a strong floor under the price of oil at costs theoretically above pro-growth levels for the foreseeable future, even with the prolific rise in US natural gas production. Since no new oil refineries have come on line in the US for years, we can assume that at least part of the decision to maintain such historically high gas prices is to ensure high profits for energy companies and to destroy demand among consumers. Destroyed demand helps to control oil consumption at a crucial time for the industry, when all the oil majors and state companies have kept steady eyes on the developing situation in Russia, where Putin’s Kremlin has just brought all of Russia’s oil production under his direct political control in Moscow. This a logical move if one fears that Arctic resources will be much harder to extract than media stories suggest. Meanwhile, back in the United States all the natural gas fracking hasn’t lowered the price of oil or gasoline. Something strange is happening.

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While we might put off a lengthy discussion of peak oil for another day, we should raise the fact that mainstream economists are beginning to question the relationship between oil supplies, technological innovation, and the assumption that infinite growth economies can continue to expand indefinitely. For example, the Financial Times’ lead columnist Martin Wolf recently published an article called “Is unlimited growth a thing of the past?” To answer this “heretical question,” Wolf turns to a paper published by Robert Gordon of Northwestern University that challenges the “conventional view” on economic growth.

Gordon explains that growth has historically come from increases in the population, which Gordon traces by focusing on “productivity,” or how much each worker can produce. In the middle of the 18th century, growth began to go higher than population increases. It reached its peak in the 25 years following World War II. It has since trended lower, and Gordon expects it to continue trending lower. This explains why central banks have add to print so much capital in the past few years: we were or are at peak prosperity, or peak capital. Moreover, Gordon claims that increases in growth came from one-off discoveries that are not tied to the concentration of wealth to investors. Writes Wolf: “The core of Prof Gordon’s argument is that growth is driven by the discovery and subsequent exploitation of specific technologies and – above all – by “general purpose technologies”, which transform life in ways both deep and broad.”

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Gordon traces the main leaps in quality of life to the scientific discoveries coming from the first and second industrial revolutions: electricity, the combustion engine, domestic running water, radio, telephone, and, importantly, “chemicals and petroleum.” The great discoveries of the 19th and 20th centuries came from grand innovations in energy; first came steam, and then oil. The third major economic era, the one of our lifetimes, was “information,” which Gordon says has not been nearly as fruitful as the first two – because it didn’t invent new forms or kinds of energy. The computer has revolutionized the speed and organization of life, but it has not altered the fundamental basics of the global economy, which still rely on heavily polluting fossil fuels.

Wolf relates a thought-experiment Gordon offers: would you trade your computer for running water? Would you rather give up your smart phone or your toilet? Behind these questions are urgent issues. “Transport and energy technologies haven’t changed in half a century,” Wolf writes, adding, “lower taxes are not going to change this.” In his conclusions, Gordon writes that slowing growth means that real incomes “outside the elite” are going to stop growing (note their use of the term “elite,” not mine). Wolf then concludes that as incomes and innovations slow, the only people happy in this new world will be “the elites of high-income countries.” As for everyone else? “The rest of their populations will not like it. Get used to this. It will not change.”

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This conclusion is a limit in Wolf’s thinking. As we’ve seen here, it’s already taken serious crowd control measures to try and channel ordinary anger away from the elite politics that govern the planet’s key resource nations. It’s also fairly specious to openly state that the elite hoarding of wealth does not actually affect historical rates of economic growth, and then claim that “it will not change.” We’ve already seen the crowds and riots trying to change it. The only way to achieve total success against them is to transform the planet into a police state. Then we have to imagine that transformation as both possible to maintain and even financially feasible. Those are questions, too. But taken together, we have all the vital issues of this blog intertwined together: as the pie shrinks and the elites maintain their slices by giving publics smaller bites, the crowds and riots will emerge. It’s a simple equation that balances the crazy math of late capitalism, and it’s worth a sustained reflection. We’ll be right here, waiting for it, one day at a time.

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2 responses to “Growth Crisis in Global Economy Censored Beneath US Election Fever

  1. Pingback: We are in crisis | Crisis-Action

  2. Pingback: The $700 Trillion Joke Part III: The New Finance Bubbles and the Politics of Slow Growth | The Daily Crowd

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