In Miami, there was no hope of such restraint from the new supercharged ‘homeland security’ forces. They were whipped up into a frenzy by wildly exaggerated reports, including reports from the local police chief, of armies of anarchists descending on the streets to protest the FTAA. They were armed with millions of dollars in new high-tech enforcement equipment they were eager to test out. They equipped the mainstream media with ‘embedded’ military outfits so they could safely film the show. And they knew the FBI, Homeland Security and others were watching this as a test of next year’s security procedures for the Republican and Democratic national conventions. In short, they wanted violence, and were told to expect it.

Our mother ship, Salon.com, has launched a series of stories on the erosion of civil liberties in America since the Bush regime seized power in America in 2000. The story of the FTAA protests leads off the series. It fulfils my worst fears about what has happened to an America polarized by fear, by political opportunism, by apathy, by an overwhelming sense of powerlessness, and by ignorance. It’s title, This is Not America, reflects the views of seniors caught up in the police state that Miami was turned into, a rehearsal of what ‘Homeland Security’ would like to see all of America become.

Please read the whole article. What happened was nothing short of a police riot, a juiced up, power-happy paramilitary gang of government sanctioned and heavily armed mobsters running through the streets of a major American city indiscriminately beating, shooting at, arresting and abusing innocent and unarmed civilians, many of them not protesters at all, most of them in retreat from the unprovoked onslaught of a police force run amok. After it was over, it was declared a ‘success’ and a ‘model’ for dealing with future dissent.

I was scheduled to be in Miami during the week of the protests, at a business meeting. At the last minute we were notified that we should move the meeting to another venue. The meeting was changed to Chicago, and our Miami offices, on advice of police, were closed for the entire week. The police state was clearly planned in advance, and they didn’t want any business people getting in the way. If they’d witnessed what the protesters did, they might have seen what is happening to America. And the anti-democracy forces now in control in America didn’t want that. Not yet.

Bush’s economic extremism was best summarized by one of his own neocons, Grover Norquist, who said “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” Thom Hartmann explains this horrendously simplistic and dangerous philosopy here. This philosophy might be summarized as follows:

As Hartmann points out, the anti-abortion, pro-capital punishment, god-fearing components of the neocon agenda are merely window-dressing to “fill the tent”. They’re expedient but not essential to the philosophy.

With government control over big business largely eliminated, the economic system quickly becomes dangerously unstable. We have recently seen unprecedented whipsaw movements in stock markets and currency markets. ‘Free’ trade has bankrupted most third world economies. Small businesses have been crushed by the ever-increasing power of the oligopolies that now control almost every industry. More than half of us describe ourselves as ‘underemployed’ — doing work that is beneath our capabilities and underpaid accordingly. Most of us have our retirement incomes dependent on the continued prosperity of the Fortune 500, in which our pensions are invested. There is no alternative investment: fixed-income investments pay almost no interest (thanks to the successful corporatist campaign to brand inflation as ‘evil’, which it is not), and the housing market is so overheated that a bubble burst is inevitable. Because of the staggering and unprecedented US debt and trade deficit, interest rates are poised to spike, which will make repayment of mortgages and consumer debt impossible and force millions into bankruptcy, send stock and bond markets and the US dollar into a tailspin, and force abandonment of the US dollar as the global monetary standard in favour of the Euro. That in turn will force huge increases in tax rates in the US to repay the colossal debt.

The chart above shows the Price/Earnings (P/E) ratio of the S&P 500 (blue line). With the run-up in the last week since that chart, the P/E ratio stands at about 30. That means that the average price per share is thirty times the average expected earnings per share for the next year. Why would people pay thirty dollars for a share that is only earning one dollar per year? Would you give someone thirty dollars today with the promise of getting a dollar a year in return? Of course not. These stock prices are discounting anticipated massive increases in profits for the S&P 500 companies in the future. One rule of thumb suggests that the P/E ratio discounts what annual percentage increase in profits is ‘built in’ to the current stock price. By that measure, the profits of the S&P 500 will have to increase by 30% per year, more or less forever, to justify the current prices. If you gave someone $30 today with a promise of getting back $1 next year, plus $1.30 the following year, plus $1.69 the year after that, etc., it now looks like at least a reasonable investment.

So if the stock market (and your pension) requires the typical S&P 500 company’s profits to grow endlessly by 30% per year, how is that going to be achieved? Most of these companies are now global, so the increase is not going to be achieved by expanding into new markets. If they take over another company, they’ll have more profits but also more shares, so growth can’t come that way either. There’s very little innovation in the economy, and what there is tends to be more than offset by the inevitable drop in prices (and hence profits) once a product becomes ‘mature’. In short, there is no reason to believe that these 500 globally dominant companies can expect to increase revenues considerably in the future at all. Consumer debt is already at record levels, the little guys have already been squeezed out by the oligopolies, and spending on new products is simply replacing spending on older, obsolete ones.

How do you increase profits if revenues are flat? You cut costs. Material costs have already dropped in recent years, so the principal way you cut costs today is by reducing the cost of labour. That means offshoring, outsourcing, getting rid of the union, firing older workers to bring in cheaper younger ones, and lowering product and service quality. All of that means laying off and under-employing domestic workers, creating unemployment and underemployment. This of course becomes a vicious cycle, since this further reduces consumer spending power and forces yet more ‘productivity’ improvements (offshoring and layoffs) to keep profits rising, the ‘Wal-Mart Dilemma’.

Eventually you crash into a wall: At some point there are simply no further ‘productivity’ improvements to be had, even if you ‘win’ the treacherous Race to the Bottom. Then what? Then you realize that a reasonable P/E ratio for the S&P 500 is 10 to 15 (which is what it always was until a generation ago), not 30. After you’ve lost your job to ‘productivity’ cuts, and after you’ve been forced to buy stuff from Wal-Mart made and serviced by the third world people that took your job away, then you lose half or two thirds or more of your pension as stock markets tank.

Mind you, once the calamity of the Bush debt, the Bush trade deficit, the Bush tax cuts for the rich, the profligate Bush war spending, the Bush subsidies and handouts to corporate friends start to register on the ‘free’ markets, you probably won’t have to wait for the no-more-productivity-improvements wall to eliminate your retirement income. The ‘efficient market’ should wipe them out well before that. And watch for an interest rate spike to accelerate the decline further, and a housing price bubble burst to accompany the collapse.

Oh, well, there’s always reverse mortgages.