A recent article in the Wall Street Journal showed that most of the people who lost jobs in this most recent recession found new ones at lower pay. Over a third of these people had to take pay cuts of at least 20 percent. Pay cuts. We haven't experienced real, sustained pay cuts across a large swath of Americans since the 1930s.
But this isn't just a tragedy; it is in fact a conspiracy. The people in charge aren't just failing to prevent this from happening. They want it to happen. You see, pay cuts for workers mean that prices as a whole in the economy don't rise. There's less inflation, which means that banks and creditors make more money.
What do I mean by a conspiracy? Well, you can read all about it. It's right in the transcripts of the December 2005 Federal Open Market Committee, which is the committee of central bankers that run America (more on that below). In that meeting, Dallas Fed President Richard Fisher is complaining about the enormous quantity of Chinese goods flowing into America. He points out that this is creating 'disinflation', i.e. lowering prices and wages for Americans.
Only, he isn't complaining that there are too many Chinese imports, he is frustrated there aren't enough imports. Even though China has built special export-only ports to ship goods out of China, he says, the ports at "Long Beach and Northwest" can't absorb what China wants to sell us, because of work rules (i.e. unions). This is a huge problem, Fisher continues, because it is blocking his CEO contacts from outsourcing as much work abroad as quickly as possible. They cannot "exploit China" fast enough.
You won't be surprised to hear that shipping American jobs overseas isn't a new strategy. It's been going on in earnest since the 1970s -- crushing inflation by crushing our wages. According to Bill Greider, who I recently interviewed on Radio Free Dylan, in the early 1980s, Paul Volcker would carry around a card of union wages, so he would know when labor "got the message and surrendered on its wage demands".
Fisher is just the latest Fed official to applaud this trend. Here's the back story. In the 1970s, there was a lot of inflation. The oligarchs of the time didn't like this, because it made their portfolios worth less money. So they decided they would clamp down on inflation by no longer allowing wage increases. To get the goods they needed without a high wage work force, they would ship in everything they needed from East Asia and Mexico. The strategy worked. Inflation collapsed. Wages stopped going up. There were no more strikes. Unemployment jumped.
There were all sorts of excuses for why this was a good idea -- we would do the 'high value add' work in America, like research and development, while the 'low quality work' like manufacturing went abroad. And everyone would benefit -- sure you wouldn't get a raise, but you'd get low prices at Walmart (Walmart shows up all the time in FOMC meeting transcripts). But basically this was a way of ensuring that banks and creditors could make a lot of money that would instead go to workers. It was known as 'the great moderation', a term coined by Bernanke, and was considered a great success.
As late as 2005, Richard Fisher was celebrating this trend. In that same meeting where he complained about too few Chinese goods coming into the US, he bragged about the weakness of one of the most significant employers in the United States: "My most delicious irony is the fact that similarly dated Vietnamese debt now trades on a price basis richer, and on a yield basis lower, than that of Ford Motor Company. [Laughter]"
Just who is Richard Fisher working for, anyway?
This is a systemic problem, and it requires a systemic answer. Right now, China makes our goods, the Chinese workers get our jobs, and American workers get pay cuts. But, the Chinese also lend us our own money back to us, which we then give to JP Morgan, Citigroup, Goldman, and Bank of America so they can speculate with. Pretty soon, China will have our entire industrial base, and we will be left with the socially destructive financial oligarchs that Charles Ferguson described in Inside Job.
This is not inevitable. We can fight back. The first thing to do is educate yourself on what is really going on, and on who makes the decisions in America. And who is that? It's not just the people at the White House and in Congress.
When I was a kid, I used to think that adults ran the world somewhere. There was a room where the adults gathered, and talked about stuff, and made decisions. As I grew up, I realized this wasn't true, that no one was in charge. Then one day I discovered the Federal Reserve, and I realized that my instincts as a kid were right on. The room where the adults gather and decide stuff is not the White House, though. It's at the Fed. And the group of adults is what the Federal Open Market Committee (FOMC) actually is.
It is the committee of American central bankers who decide who gets money, and who doesn't. These people talk to CEOs and Wall Street friends, look at various statistics from the markets, and raise or lower interest rates. Sometimes, when times are especially bad, they give a bunch of interest-free money to bankers or hedge fund managers. In other words, they run America.
Officially, of course, we have a Congress, and a president, but to really know what's going on, you have to read the transcripts from FOMC meetings. The Fed releases them on a five-year lag, so we can only know what they were saying as of 2005. That's better than it used to be; the Fed used to release nothing at all, and shred the transcripts of its meetings.
Regardless, the lack of attention to what these people say and think is key to the dominance of our lives by the big banks. The Fed -- the adults in charge -- are often working on behalf of Chinese interests, and on behalf of our own oil dependency (for a similar reason, oil imports create financial flows that then recycle back through American banks). They may not know it. Or they just may not distinguish between Chinese interests and the interests of JP Morgan, etc.
But the best thing we can do, is learn. It is how every great movement that speaks truth to power in America has begun. So with that in mind, here's the FOMC transcript.
Let's all see what our "adults" have been up to.