REALITY DISCONNECT
From Enron to IBM, major U.S. corporations have been caught out doctoring their balance sheets to make their companies look better. But the situation is much wider than that. The reality disconnect also infects politics inside the U.S. - with the media being a willing participant.
What The American Public Is NOT Being Told:
U.S. military expenditures now amount to 40% of all the military spending in the world. It terms of 2000 years of world history, this alone makes the U.S. arms budget larger than that of any world empire of the past. The Washington Post now reports that President Bush has authorised"covert U.S. operations" - in EIGHTY nations. Geopolitically, the effect of this authorisation is to erase all political borders - in the eyes of the U.S. Administration and Mr Bush.
If that is not the act of an empire, then nothing is.
And it is costing. U.S. Treasury Secretary O'Neill has sent another strident request to Congress that they hurry up and raise the debt ceiling. The Bush Administration wants an increase of $US 750 Billion which, they say, will be sufficient to last for the next TWO years!
There's more. In our last issue (#443), The Privateer reported that the price/earnings (p/e) ratio on the S&P 500 stood at 60. Now, Barrons has HALVED the most recent S&P 500 p/e ratio. How? Simple, they changed the calculations. Barrons has switched to calculating the p/e ratio on"operating earnings" rather than on GAAP (Generally Accepted Accounting Principles) which has been in use for nearly a century.
What Has All Of The Above In Common?:
All of it is a blatant attempt to disconnect facts and knowledge from reality. Don't like the S&P 500 p/e? No problem. Change the method of calculating it. Plan to send"covert teams" into 80 nations? No problem, it's covert and has"deniability". The Bush Administration will, as a matter of course, deny it. That is what"covert operations" are all about.
The U.S. has a larger defence budget than the combined budgets of the top spending 15 nations. Of course! The U.S. has to be"defended", doesn't it? And that means that an additional $US 750 Billion will have to be borrowed over the next two years. Finally, there is the Campaign Finance Reform (CFM) Bill before Congress which will impose a five-year jail term on any American saying anything at all about any incumbent Congressional member in the 60 days before an election. What are"they" all counting on? They are looking to individual Americans to surrender to a torrent of lies.
The Fast Growing Perception GAAP:
GAAP - Generally Accepted Accounting Principles - has come to the fore again."Aggressive Accounting", a wonderful spin- term, is now in bad odour. Even companies as venerable as IBM have had to redo their recent accounts. In IBM's case, this involved $US 300 million from the sale of an asset which, inadvertently, ended up being counted as earnings. Right down the line, U.S. companies have been hammered because of their accounting MAL-practices.
A Sea Of Symptoms - A Single Disease:
All of what has been discussed so far are symptoms. The disease is general, right across the entire U.S. system. What is happening now in the U.S. is that everybody is certain that everybody else is lying, at least to some extent or to some degree. Corporate accounts are dishonest, politics are dishonest, laws are dishonest (and blatantly unconstitutional), credit and loans are dishonest, stock markets (p/e ratios and a lot more) are dishonest, and at the economic root, MONEY is dishonest.
As the experience across the former Soviet Bloc clearly shows, when people are living in an ocean of lies, they retreat. They narrow their horizons intellectually as well as their practical actions to the zone of what is more or less right in front of their eyes. In effect, perceptions as well as action becomes local. This is fatal to long-term plans and to investment. It is fatal because fewer and fewer individuals will commit themselves to a longer-term course of action, especially if it involves cooperation with others. No one is confident that these others can be trusted. The fact that some individuals are honest, experienced and knowledgeable is moot. The narrowing of intellectual and practical horizons makes it increasingly difficult to tell the difference for more and more people. No one trusts anyone.
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