May the source be with you, but remember the KISS principle ;-)
Financial Sector Induced Systemic Instability of Economy
While I believe in usefulness of capital markets, it is clear that they are double edge sword and
that banks "in a long run" tend to behave like
Mr. Capone may have something to say about danger of banks :-).That means that growth of
financial sector represents a direct threat to the stability of the society. Positive feedback loops
creates one financial crisis after another with the increasing magnitude leading up to a collapse of
financial system like happened in 1927 and 2008.
"Minsky's financial instability hypothesis depends critically on what amounts to a sociological
insight. People change their minds about taking risks. They don't make a one-time rational
judgment about debt use and stock market exposure and stick to it. Instead, they change their
minds over time. And history is quite clear about how they change their minds. The
longer the good times endure, the more people begin to see wisdom in risky strategies."
The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our
Economic Future, by Robert Barbera
The flaw with Capitalism is that it creates its own positive feedback loop, snowballing to
the point where the accumulation of wealth and power hurts people — eventually even those at the
top of the food chain. ”
Banks are a clear case of market failure and their employees at the senior level have
basically become the biggest bank robbers of all time. As for basing pay on current revenues
and not profits over extended periods of time, then that is a clear case of market failure --
The banksters have been able to sell the “talent” myth to justify their outsized pay
because they are the only ones able to deliver the type of GDP growth the U.S. economy needs in
the short term, even if that kills the U.S. economy in the long term. You’ll be gone, I’ll be
Unfortunately, many countries go broke pursuing war, if not financially, then morally (are
the two different? – this post suggests otherwise).
I occurs to me that the U.S. is also in
that flock; interventions justified by grand cause built on fallacy, the alpha and omega of failure.
Is the financial apparatchik (or Nomenklatura, a term I like which, as many from the Soviet era,
succinctly describes aspects of our situation today) fated also to the trash heap, despite the
best efforts of the Man of the hour, Ben Bernanke?
Financialization is a Damocles sword hanging over the neoliberal society
While I believe in usefulness of capital markets, it is clear that they are double edge sword and
that banks "in a long run" tend to behave like
Mr. Capone may have something to say about danger of banks :-).That means that growth of financial
sector represents a direct threat to the stability of the society (Keynesianism
and the Great Recession )
Without adult supervision, as it were, a financial sector that was already inherently unstable
went wild. When the subprime assets were found to be toxic since they were based on mortgages on
which borrowers had defaulted, highly indebted or leveraged banks that had bought these now
valueless securities had little equity to repay their creditors or depositors who now came after
them. This quickly led to their bankruptcy, as in the case of Lehman Brothers, or to their being
bailed out by government, as was the case with most of the biggest banks. The finance sector
froze up, resulting in a recession—a big one—in the real economy.
Neoliberal revolution, or, as Simon Johnson called it after "quite coup" (Atlantic),
brought political power to the financial oligarchy deposed after the New Deal. Deregulation
naturally followed, with especially big role played by corrupt Clinton administration. Positive feedback loops creates one financial crisis after another with the
increasing magnitude. "Saving and loans" crisis followed by dot-com crisis of 2000, which in
turn followed by the collapse of financial system in 2008, which looks somewhat similar to what
happened in 1927. No prominent financial honcho, who was instrumental in creating "subprime
crisis" was jailed. Most remained filthy rich.
Unless the society puts severe limits on their actions like was done during New Deal,
financial firms successfully
subvert the regulation mechanisms and take the society hostage. But periodic purges with relocation
of the most active promoters of "freedom for banks" (aka free market fundamentalism) under the smoke
screen of "free market" promotion does not solve the problem of positive feedback loops that banks create
by mere existence. That's difficult to do while neoliberal ideology and related neoclassical economy
dominates the society thinking (via brainwashing), with universities playing especially negative
role -- most of economics departments are captured by neoliberals who censor any heretics. So year
after year brainwashing students enter the society without understanding real dangers that
neoliberalism brought for them. Including lack of meaningful employment opportunities.
Of course, most of high level officers of leading finance institutions which caused the crisis of
2008-2009 as a psychological type are as close to gangsters as one can get. But there is
something in their actions that does not depend on individual traits (although many of them
definitely can be classified as psychopaths), and is more related to their social position.
This situation is somewhat similar to Bolsheviks coup d'état of 1917 which resulted in capturing
Russia by this ideological sect. And in this sense quite coupe of 1980 is also irreversible in
the same sense as Bolsheviks revolution was irreversible: the "occupation" of the country by a
fanatical sect lasts until the population rejects the ideology with its (now apparent) utopian
Bolshevism which lasted
75 years, spend in such zombie state the last two decades (if we assume 1991 as the year of death of
Bolshevism, its ideology was dead much earlier -- the grave flaws in it were visible from late 60th,
if not after the WWII). But only when their ideology was destroyed both by inability to raise the standard of living
of the population and by the growing neoliberal ideology as an alternative (and a new, more powerful then Marxism high-demand
cult) Bolsheviks started to lose the grip on their power in the country. As a result Bolsheviks lost the power
only in 1991, or more correctly switched camps and privatized the country. If not inaptness of their
last General Secretary, they probably could last more. In any case after the ideology collapsed, the
USSR disintegrated (or more correctly turn by national elites, each of which wanted their peace of
The sad truth is that the mere growth of financial sector creates additional positive feedback loops
and increases structural instability within both the financial sector itself and the society at large.
Dynamic systems with strong positive feedback loops not compensated by negative feedback loops are unstable.
As a result banks and other financial institution periodically generate a deep, devastating crisis.
This is the meaning of famous Hyman Minsky phrase "stability is destabilizing".
In other words, financial apparatchiks (or Financial Nomenklatura, a term from the Soviet era, which
succinctly describes aspects of our situation today) drive the country off the cliff because they do
not have any countervailing forces, by the strength of their political influence and unsaturable
greed. Although the following
analogy in weaker then analogy with dynamic systems with positive feedback loops, outsized financial
sector can be viewed in biological terms as cancer.
known medically as a malignantneoplasm, is a broad group of
diseases involving unregulated
cell growth. In cancer,
cells divide and grow
uncontrollably, forming malignant tumors, and invading nearby parts of the body. The cancer may also
spread to more distant parts
of the body through the lymphatic system
or bloodstream. Not all tumors
are cancerous; benign tumors
do not invade neighboring tissues and do not spread throughout the body. There are over 200 different
known cancers that affect humans.
Like certain types of cancer they depend of weakening "tumor suppressor genes" (via "Quiet
coup" mechanism of acquiring dominant political power) which allow then to engage in uncontrolled growth, destroying
healthy cells (and first of all local manufacturing).
The other suspicion is the unchecked financialization always goes too far and the last N
percent of financial activity absorbs much more resources (especially intellectual resources) and
creates more potential instability than its additional efficiency-benefits (often zero or negative) can justify. It is hard
to imagine that a Hedge Fund Operator of the Year does anything that is even remotely socially useful to justify his
enormous (and lightly taxed) compensation. It is pure wealth redistribution up based on political domination
of financial oligarchy. Significant vulnerabilities within the shadow banking system and
derivatives are plain vanilla socially destructive. Yet they persist due to inevitable political power
grab by financial oligarchy (Quiet coup).
Again, I would like to stress that this problem of the oversized financial sector which produces
one devastating crisis after another
is closely related to the problem of a positive feedback loops. And the society in which banks are given
free hand inevitably degrades into "socialism for banks" or "casino
capitalism" -- a type of
neoliberalism with huge
inequality and huge criminality of top banking officers.
Whether we can do without private banks is unclear, but there is sound evidence that unlike growth
of manufacturing, private financial sector growth is dangerous for the society health and perverts society
goals. Like cult groups the financial world does a terrific job of "shunning" the principled individuals
and suppressing dissent (by capturing and cultivating neoliberal stooges in all major university
departments and press),
so self-destructing tendencies after they arise can't be stopped within the framework of
neoliberalism. In a way financial
firm is like sociopath inevitable produces its trail of victims (and sociopaths might be useful in battles exactly due
to the qualities such as ability to remain cool in dangerous situation, that make them dangerous in the normal course of events).
This tendency of society with unregulated or lightly regulated financial sector toward self-destruction
was first formulated as "Minsky instability hypothesis" --
and outstanding intellectual achievement of American economic Hyman Minsky (September 23, 1919 –
October 24, 1996). Who BTW was pretty much underappreciated (if not suppressed) during his lifetime because his views
were different from orthodox (and false) neoclassic economic theory which dominates US universities,
Like flat Earth theory was enforce by Catholic church before, it is fiercely enforced by an army of well paid neoliberal economics, those
Jesuits of modern era. Who prosecute heretics who question flat Earth theory even more efficiently then
their medieval counterparts; the only difference is that they do not burn the literally, only
Former Washington University in St. Louis economics professor Hyman P. Minsky had predicted the
Great Recession decades before it happened. Hyman Minsky was a real student of the Great
Depression, while Bernanke who widely is viewed as a scholar who studied the Great Depression, in
reality was a charlatan, who just tried to explain the Great Depression from the positions of
neo-classical economy. That's a big difference.
Minsky instability hypothesis ("stability is destabilizing" under capitalism) that emerged from
his analysis of the Great Depression was based on intellectual heritage of three great thinkers in
economics (my presentation is partially based on an outstanding lecture by Steve Keen Lecture 6 on Minsky, Financial
Instability, the Great Depression & the Global Financial Crisis). We can talk about
three source of influence, there authors writing of which touched the same subject from similar
positions and were the base of Hyman Minsky great advance in understanding of mechanics of
development of financial crisis under capitalism and the critical role of financial system in it
(neoclassical economics ignores the existence of financial system in its analysis):
Minsky didn't follow the conventional version of Marxism . And it was dangerous for him to
do so due to McCarthysm. Even mentioning of Marx might lead to strakism fromthe academy those years.
McCarthy and his followers in academy did not understand the difference between Marx great analysis
of capitalism and his utopian vision of the future. Impliedly this witch hunt helped to establish
hegemony of neoclassical economy in economic departments in the USA.
While Minsky did not cited Marx in his writings and did use Marx's Labor Theory of Value his
thinking was definitely influenced by Marx’s critique of finance. We now know that he read and
admired the Capital. And that not accidental due to the fact that his parents were Mensheviks -- a
suppressed after Bolshevik revolution more moderate wing of Russian Social Democratic Party that
rejected the idea of launching the socialist revolution in Russia -- in their opinion Russia
needed first to became a capitalist country and get rid of remnants of feudalism. They escaped from
Soviet Russia when Mensheviks started to be prosecuted by Bolsheviks.
And probably the main influence on Minsky was not Marx's discussion of finance in Volume I of Capital
with a "commodity" model of money, but critical remarks scattered in Volumes II & III
(which were not edited by Marx by compiled posthumously by Engels), where he was really critical of
big banks as well as Marx's earlier works (Grundrisse,
Theories of Surplus Value) where Marx was scathing about finance:
"A high rate of interest can also indicate, as it did in 1857, that the country is undermined
by the roving cavaliers of credit who can afford to pay a high interest because they pay it out
of other people's pocket* (whereby, however, they help to determine the rate of interest
for all) and meanwhile they live in grand style on anticipated profits.
The second source on which Minsky based his insights was Irving Fisher. Irving Fisher’s
reputation destroyed by wrong predictions on stock market prices. In aftermath, developed theory to
explain the crash and published it in his book "The Debt Deflation Theory of Great
Depressions". His main points are:
Neoclassical theory assumed equilibrium but any real world equilibrium will be short-lived
"New disturbances are, humanly speaking, sure to occur, so that, in actual fact, any
variable is almost always above or below the ideal equilibrium."
Theoretically... there must be—over-or under-production, over- or under-consumption,..., and
over or under everything else.
It is as absurd to assume that, for any long period of time, the variables in the economic
organization, or any part of them, will "stay put," in perfect equilibrium, as to assume that the
Atlantic Ocean can ever be without a wave." (1933:339)
According to Fisher two key disequilibrium forces that push economic into the next economic
crisis are debt and subsequent deflation
The "two dominant factors" which cause depressions are "over-indebtedness to start with and
deflation following soon after"
"Thus over-investment and over-speculation are often important; but they would have far less
serious results were they not conducted with borrowed money.
That is, over-indebtedness may lend importance to over-investment or to over-speculation. The
same is true as to over-confidence.
I fancy that over-confidence seldom does any great harm except when, as, and if, it beguiles
its victims into debt." (Fisher 1933: 341; emphasis added!)
A chain reaction when overconfidence leads to over-indebtedness: Debt liquidation leads to
Joseph Schumpeter was Joseph Schumpeter has more positive view of capitalism than the other two. He authored the theory
of creative destruction as a path by which capitalism achieves higher and higher productivity.
He capitalism as necessarily unstable, but for him this was a positive feature --
instability of capitalism the source of its creativity. His view of capitalism was highly dynamic
and somewhat resembles the view of Marx (who also thought that capitalism destroys all previous
order and create a new one):
Entrepreneurs profit by disrupting "equilibrium" of system
Finance plays essential role here by enabling entrepreneurs
To Schumpeter, entrepreneurs are people with good ideas but no money
To turn ideas into disruptive products or processes they resort to borrowing from banks
Boom caused by investment phase of entrepreneurs. New entrepreneurs undermine old or rival
products. Successful entrepreneurs repay debt, reducing money supply
In this sense the success (boom) carry the seeds of the subsequet bust because with the
success of "pioneers" draw other into thi same market and banks are more willing to finance them
seeing the success of pioneers. But when too many similar products are financed and hit the
market they create the glut and entrepreneurs who ere late to the party are unable to pay the
debts and go bankrupt desire the fact that might have superiors products (but not superior
enough). Slump caused when excessive products hit the market and there are not enough buyers.
Debt deflation follows.
Unlike Marx, who thought that the periodic crisis of overproduction is the source of
instability (as well as gradual absolute impoverishment of workers), Minsky assumed that the
key source of that instability of capitalist system is connected with the cycles of business
borrowing and fractional bank lending, when "good times" lead to excessive borrowing leading to high
leverage and overproduction and thus to eventual debt crisis (The
Alternative To Neoliberalism ):
Minsky on capitalism:
He followed Marx stating that "capitalism is inherently flawed, being prone to booms, crises
This instability is due to characteristics the financial system must possess and will
inevitably acquire, if it is to be consistent with full-blown capitalism.
Such a financial system will be capable of both generating signals that induce an accelerating
desire to invest and of financing that accelerating investment." (Minsky 1969b: 224)
“The natural starting place for analyzing the relation between debt and income is to take
an economy with a cyclical past that is now doing well.
The inherited debt reflects the history of the economy, which includes a period in the not
too distant past in which the economy did not do well.
Acceptable liability structures are based upon some margin of safety so that expected cash
flows, even in periods when the economy is not doing well, will cover contractual debt payments.
As the period over which the economy does well lengthens, two things become evident in board
rooms. Existing debts are easily validated and units that were heavily in debt prospered; it paid
to lever." (65)
It becomes apparent that the margins of safety built into debt structures were too great.
ans should be reduced...
As a result, over a period in which the economy does well, views about acceptable debt
structure change. In the dealmaking that goes on between banks, investment bankers, and businessmen,
the acceptable amount of debt to use in financing various types of activity and positions increases.
This increase in the weight of debt financing raises the market pnce of capital assets and
increases investment. As this continues the economy is transformed into a boom economy... ” (65)
This transforms a period of tranquil growth into a period of speculative excess
“Stable growth is inconsistent with the manner in which investment is determined in an economy
in which debt-financed ownership of capital assets exists, and the extent to which such debt financing
can be carried is market determined.
It follows that the fundamental instability of a capitalist economy is upward.
The tendency to transform doing well into a speculative investment boom is the basic instability
in a capitalist economy." (65)
The idea of Minsky moment is related to the fact that the fractional reserve banking periodically
causes credit collapse when the leveraged credit expansion goes into reverse. And mainstream economists
do not want to talk about the fact that increasing confidence breeds increased leverage. So financial
stability breeds instability and subsequent financial crisis. All actions to guarantee a market rise,
ultimately guarantee it's destruction because greed will always take advantage of a "sure thing" and
push it beyond reasonable boundaries. In other words, marker players are no rational and assume
that it would be foolish not to maximize leverage in a market which is going up. So the fractional
reserve banking mechanisms ultimately and ironically lead to over lending and guarantee the subsequent
crisis and the market's destruction. Stability breed instability.
That means that fractional reserve banking based economic system with private players (aka capitalism)
is inherently unstable. And first of all because fractional reserve banking is debt based. In
order to have growth it must create debt. Eventually the pyramid of debt crushes and crisis hit. When
the credit expansion fuels asset price bubbles, the dangers for the financial sector and the real economy
are substantial because this way the credit boom bubble is inflated which eventually burst. The damage
done to the economy by the bursting of credit boom bubbles is significant and long lasting.
«When credit growth fuels asset price bubbles, the dangers for the financial sector and
the real economy are much more substantial.»
So M Minsky 50 years ago and M Pettis 15 years ago (in his "The volatility machine") had it
right? Who could have imagined! :-)
«In the past decades, central banks typically have taken a hands-off approach to asset
price bubbles and credit booms.»
If only! They have been feeding credit-based asset price bubbles by at the same time weakening
regulations to push up allowed capital-leverage ratios, and boosting the quantity of credit as
high as possible, but specifically most for leveraged speculation on assets, by allowing vast-overvaluations
on those assets.
Central banks have worked hard in most Anglo-American countries to redistribute income and
wealth from "inflationary" worker incomes to "non-inflationary" rentier incomes via hyper-subsidizing
with endless cheap credit the excesses of financial speculation in driving up asset prices.
John Kay in his January 5 2010 FT column very aptly explained the systemic instability of financial
The credit crunch of 2007-08 was the third phase of a larger and longer financial crisis. The
first phase was the emerging market defaults of the 1990s. The second was the new economy boom and
bust at the turn of the century. The third was the collapse of markets for structured debt products,
which had grown so rapidly in the five years up to 2007.
The manifestation of the problem in each phase was different – first emerging markets, then
stock markets, then debt. But the mechanics were essentially the same. Financial institutions
identified a genuine economic change – the assimilation of some poor countries into the global economy,
the opportunities offered to business by new information technology, and the development of opportunities
to manage risk and maturity mismatch more effectively through markets. Competition to sell
products led to wild exaggeration of the pace and scope of these trends. The resulting herd enthusiasm
led to mispricing – particularly in asset markets, which yielded large, and largely illusory, profits,
of which a substantial fraction was paid to employees.
Eventually, at the end of each phase, reality impinged. The activities that once seemed so profitable
– funding the financial systems of emerging economies, promoting start-up internet businesses, trading
in structured debt products – turned out, in fact, to have been a source of losses. Lenders had to
make write-offs, most of the new economy stocks proved valueless and many structured products became
unmarketable. Governments, and particularly the US government, reacted on each occasion by
pumping money into the financial system in the hope of staving off wider collapse, with some degree
of success. At the end of each phase, regulators and financial institutions declared that
lessons had been learnt. While measures were implemented which, if they had been introduced five
years earlier, might have prevented the most recent crisis from taking the particular form it did,
these responses addressed the particular problem that had just occurred, rather than the underlying
generic problems of skewed incentives and dysfunctional institutional structures.
The public support of markets provided on each occasion the fuel needed to stoke the next crisis.
Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern
is one of cycles of increasing amplitude.
I do not know what the epicenter of the next crisis will be, except that it is unlikely to involve
structured debt products. I do know that unless human nature changes or there is fundamental change
in the structure of the financial services industry – equally improbable – there will be another
manifestation once again based on naive extrapolation and collective magical thinking. The recent
crisis taxed to the full – the word tax is used deliberately – the resources of world governments
and their citizens. Even if there is will to respond to the next crisis, the capacity to do so may
not be there.
The citizens of that most placid of countries, Iceland, now backed by their president, have found
a characteristically polite and restrained way of disputing an obligation to stump up large sums
of cash to pay for the arrogance and greed of other people. They are right. We should listen to them
before the same message is conveyed in much more violent form, in another place and at another time.
But it seems unlikely that we will.
We made a mistake in the closing decades of the 20th century. We removed restrictions that
had imposed functional separation on financial institutions. This led to businesses riddled
with conflicts of interest and culture, controlled by warring groups of their own senior employees.
The scale of resources such businesses commanded enabled them to wield influence to create a – for
them – virtuous circle of growing economic and political power. That mistake will not be easily remedied,
and that is why I view the new decade with great apprehension. In the name of free markets, we created
a monster that threatens to destroy the very free markets we extol.
While Hyman Minsky was the first clearly formulate the financial instability hypothesis, Keynes
also understood this dynamic pretty well. He postulated that a world with a large financial
sector and an excessive emphasis on the production of investment products creates instability both in
terms of output and prices. In other words it automatically tends to generate credit and asset bubbles.
The key driver is the fact that financial professionals generally risk other people’s money and due
to this fact have asymmetrical incentives:
They get big rewards when bets go right
They don’t have to pay when bets go wrong.
This asymmetry is not a new observation of this systemic problem. Andrew Jackson noted it in much
more polemic way long ago:
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used
the funds of the bank to speculate in the breadstuffs of the country.When you won,
you divided the profits amongst you, and when you lost, you charged it to the bank. You tell
me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families.
That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand
families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out,
and by the grace of the Eternal God, will rout you out.”
This asymmetrical incentives ensure that the financial system is structurally biased toward
taking on more risk than what should be taken. In other words it naturally tend to slide to
the casino model, the with omnipresent reckless gambling as the primary and the most profitable mode
of operation while an opportunities last. The only way to counter this is to throw sand into the
wheels of financial mechanism: enforce strict regulations, limit money supplies and periodically
jail too enthusiastic bankers. The latter is as important or even more important as the other two because
bankers tend to abuse "limited liability" status like no other sector.
Asset inflation over the past 10 years and the subsequent catastrophe incurred is a way classic behavior
of dynamic system with strong positive feedback loop. Such behavior does not depends of personalities
of bankers or policymakers, but is an immanent property of this class of dynamic systems. And the main
driving force here was deregulation. So its important that new regulation has safety feature which make
removal of it more complicated and requiring bigger majority like is the case with constitutional issues.
Another fact was the fact that due to perverted incentives, accounting in the banks
was fraudulent from the very beginning and it was fraudulent on purpose. Essentially accounting
in banks automatically become as bad as law enforcement permits. This is a classic case of control fraud
and from prevention standpoint is make sense to establish huge penalties for auditors, which might hurt
healthy institutions but help to ensure that the most fraudulent institution lose these bank charter
before affecting the whole system. With the anti-regulatory zeal of Bush II administration the
level of auditing became too superficial, almost non-existent. I remember perverted dances with
Sarbanes–Oxley when it
was clear from the very beginning that the real goal is not to strengthen accounting but to earn fees
and to create as much profitable red tape as possible, in perfect Soviet bureaucracy style.
Deregulation also increases systemic risk by influencing the real goals of financial
organizations. At some point of deregulation process the goal of higher remuneration for the top brass
becomes self-sustainable trend and replaces all other goals of the financial organization. This
is the essence of Martin Taylor’s, the former chief executive of Barclays, article
- Innumerate bankers were ripe for a reckoning in the Financial Times (Dec 15, 2009), which is worth
reading in its entirety:
City people have always been paid well relative to others, but megabonuses are quite new.
From my own experience, in the mid-1990s no more than four or five employees of Barclays’ then
investment bank were paid more than £1m, and no one got near £2m. Around the turn of the
millennium across the market things began to take off, and accelerated rapidly – after a pause in
2001-03 – so that exceptionally high remuneration, not just individually, but in total, was paid
out between 2004 and 2007.
Observers of financial services saw unbelievable prosperity and apparently immense value
added. Yet two years later the whole industry was bankrupt. A simple reason underlies this:
any industry that pays out in cash colossal accounting profits that are largely imaginary will go
bust quickly. Not only has the industry – and by extension societies that depend on it – been
spending money that is no longer there, it has been giving away money that it only imagined it had
in the first place. Worse, it seems to want to do it all again.
What were the sources of this imaginary wealth?
First, spreads on credit that took no account of default probabilities (bankers have been
doing this for centuries, but not on this scale).
Second, unrealised mark-to-market profits on the trading book, especially in illiquid instruments.
Third, profits conjured up by taking the net present value of streams of income stretching
into the future, on derivative issuance for example.
In the last two of these the bank was not receiving any income, merely “booking revenues”.
How could they pay this non-existent wealth out in cash to their employees? Because they had
no measure of cash flow to tell them they were idiots, and because everyone else was doing it.
Paying out 50 per cent of revenues to staff had become the rule, even when the “revenues”
did not actually consist of money.
In the next phase instability is amplified by the way governments and central banks respond to crises
caused by credit bubble: the state has powerful means to end a recession, but the policies it uses give
rise to the next phase of instability, the next bubble…. When money is virtually free – or, at least,
at 0.5 per cent – traders feel stupid if they don’t leverage up to the hilt. Thus previous bubble and
crash become a dress rehearsal for the next.
Resulting self-sustaining "boom-bust" cycle is very close how electronic systems with positive feedback
loop behave and cannot be explained by neo-classical macroeconomic models. Like with electronic
devices the financial institution in this mode are unable to provide the services that are needed.
Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed:
rather, it was a system that created the illusion of stability while simultaneously creating the
conditions for an inevitable and dramatic collapse.
...our whole financial system contains
the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of
Minsky’s vision might have been dark, but he was not a fatalist; he believed it was possible to
craft policies that could blunt the collateral damage caused by financial crises. But with a growing
number of economists eager to declare the recession over, and the crisis itself apparently behind
us, these policies may prove as discomforting as the theories that prompted them in the first place.
Indeed, as economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready
to reckon with the full implications of what he saw.
And he understood the roots of the current credit bubble much better that neoclassical economists like
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled
by the rise of far riskier borrowers - what [Minsky] called speculative borrowers,
those whose income would cover interest payments but not the principal; and those he called
“Ponzi borrowers,” those whose income could cover neither, and could only pay their bills
by borrowing still further.
As these latter categories grew, the overall economy would shift from a conservative but profitable
environment to a much more freewheeling system dominated by players whose survival depended not on
sound business plans, but on borrowed money and freely available credit.
Minsky’s financial instability hypothesis suggests that when optimism is high and ample
funds are available for investment, investors tend to migrate from the safe hedge end of the Minsky
spectrum to the risky speculative and Ponzi end. Indeed, in the current crisis, investors tried to raise
returns by increasing leverage and switching to financing via short-term—sometimes overnight— borrowing
late to learn?):
In the church of Friedman, inflation was the ol' devil tempting the good folk; the 1980s seemed
to prove that, let loose, it would cause untold havoc on the populace. But, as Barbera notes:
The last five major global cyclical events were the early 1990s recession - largely occasioned
by the US Savings & Loan crisis, the collapse of Japan Inc after the stock market crash of 1990,
the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the
millennium, and the unprecedented rise and then collapse for US residential real estate in 2007-2008.
All five episodes delivered recessions, either global or regional. In no case was there a significant
prior acceleration of wages and general prices. In each case, an investment boom and an associated
asset market ran to improbable heights and then collapsed. From 1945 to 1985, there was no recession
caused by the instability of investment prompted by financial speculation - and since 1985 there
has been no recession that has not been caused by these factors.
Thus, meet the devil in Minsky's paradise - "an investment boom and an associated asset market [that]
ran to improbable heights and then collapsed".
According the Barbera, "Minsky's financial instability hypothesis depends critically on what amounts
to a sociological insight. People change their minds about taking risks. They don't make a one-time
rational judgment about debt use and stock market exposure and stick to it. Instead, they change
their minds over time. And history is quite clear about how they change their minds. The longer the
good times endure, the more people begin to see wisdom in risky strategies."
Current economy state can be called following Paul McCulley a "stable disequilibrium" very similar
to a state a sand pile. All this pile of stocks, debt instruments, derivatives, credit
default swaps and God know corresponds to a pile of sand that is on the verse of losing stability.
Each financial player works hard to maximize their own personal outcome but the "invisible hand" effect
in adding sand to the pile that is increasing systemic instability. According to Minsky, the longer
such situation continues the more likely and violent an "avalanche".
The late Hunt Taylor wrote, in 2006:
"Let us start with what we know. First, these markets look nothing like anything I've ever encountered
before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness,
the light-speed at which information moves, the degree to which the movement of one instrument triggers
nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary
to price them speak to the reality that we are now sailing in uncharted waters.
"... I've had 30-plus years of learning experiences in markets, all of which tell me that
technology and telecommunications will not do away with human greed and ignorance. I think
we will drive the car faster and faster until something bad happens. And I think it will come, like
a comet, from that part of the night sky where we least expect it."
Banking was once a dangerous profession. In Britain, for instance, bankers faced
“unlimited liability”--that is, if you ran a bank, and the bank couldn’t repay depositors or other
creditors, those people had the right to confiscate all your personal assets and income until you
repaid. It wasn’t until the second half of the nineteenth century that Britain established
limited liability for bank owners. From that point on, British bankers no longer assumed
much financial risk themselves.
In the United States, there was great experimentation with banking during the 1800s, but those
involved in the enterprise typically made a substantial commitment of their own capital. For
example, there was a well-established tradition of “double liability,” in which stockholders were
responsible for twice the original value of their shares in a bank. This encouraged stockholders
to carefully monitor bank executives and employees. And, in turn, it placed a lot of pressure on
those who managed banks. If they fared poorly, they typically faced personal and professional ruin.
The idea that a bank executive would retain wealth and social status in the event of a self-induced
calamity would have struck everyone--including bank executives themselves--as ludicrous.
Enter, in the early part of the twentieth century, the Federal Reserve. The Fed was founded in
1913, but discussion about whether to create a central bank had swirled for years. “No one can carefully
study the experience of the other great commercial nations,” argued Republican Senator Nelson Aldrich
in an influential 1909 speech, “without being convinced that disastrous results of recurring financial
crises have been successfully prevented by a proper organization of capital and by the adoption of
wise methods of banking and of currency”--in other words, a central bank. In November 1910, Aldrich
and a small group of top financiers met on an isolated island off the coast of Georgia. There, they
hammered out a draft plan to create a strong central bank that would be owned by banks themselves.
What these bankers essentially wanted was a bailout mechanism for the aftermath of speculative
crashes -- something more durable than J.P. Morgan, who saved the day in the Panic of 1907
but couldn’t be counted on to live forever. While they sought informal government backing and substantial
government financial support for their new venture, the bankers also wanted it to remain free of
government interference, oversight, or control.
Another destabilizing fact is so called myth of invisible hand which is closely related to the myth
about market self-regulation. The misunderstood argument of Adam Smith , the founder of modern
economics, that free markets led to efficient outcomes, “as if by an invisible hand” has played a central
role in these debates: it suggested that we could, by and large, rely on markets without government
intervention. About "invisible hand" deification, see
The Invisible Hand, Trumped by Darwin - NYTimes.com.
The moment in the financial system when the quantity of debt turns into quality and produces yet
another financial crisis is called Minsky moment. In other words the “Minsky moment” is the time
when an unsustainable financial boom turns into uncontrollable collapse of financial markets (aka
financial crash). The existence of Minsky moments is one of the most important counterargument against
financial market self-regulation. It also expose free market fundamentalists such as "former
Maestro" Greenspan as charlatans. Greenspan actually implicitly admitted that he is and that it was
he, who was the "machinist" who helped to bring the USA economic train off the rails in 2008
via deregulation and dismantling the New Deal installed safeguards.
Here how it is explained by Stephen Mihm in
Boston Globe in 2009
in the after math of 2008 financial crisis:
“Minsky” was shorthand for Hyman Minsky, an American macroeconomist who died over a decade
ago. He predicted almost exactly the kind of meltdown that recently hammered the global
economy. He believed in capitalism, but also believed it had almost a genetic weakness.
Modern finance, he argued, was far from the stabilizing force that mainstream economics
portrayed: rather, it was a system that created the illusion of stability while simultaneously
creating the conditions for an inevitable and dramatic collapse.
In other words, the one person who foresaw the crisis also believed that our whole financial system
contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable
flaw of capitalism.”
Minsky believed it was possible to craft policies that could blunt the collateral damage caused
by financial crises. As economists re-embrace Minsky’s prophetic insights, it is far from clear that
they’re ready to reckon with the full implications of what he saw.
Minsky theory was not well received due to powerful orthodoxy, born in the years after World War
II, known as the neoclassical synthesis. The older belief in a self-regulating, self-stabilizing
free market had selectively absorbed a few insights from John Maynard Keynes, the great economist
of the 1930s who wrote extensively of the ways that capitalism might fail to maintain full employment.
Most economists still believed that free-market capitalism was a fundamentally stable basis for an
economy, though thanks to Keynes, some now acknowledged that government might under certain circumstances
play a role in keeping the economy - and employment - on an even keel.
Economists like Paul Samuelson became the public face of the new establishment; he and others
at a handful of top universities became deeply influential in Washington. In theory, Minsky could
have been an academic star in this new establishment: Like Samuelson, he earned his doctorate in
economics at Harvard University, where he studied with legendary Austrian economist Joseph Schumpeter,
as well as future Nobel laureate Wassily Leontief.
But Minsky was cut from different cloth than many of the other big names. The descendent of immigrants
from Minsk, in modern-day Belarus, Minsky was a red-diaper baby, the son of Menshevik socialists.
While most economists spent the 1950s and 1960s toiling over mathematical models, Minsky pursued
research on poverty, hardly the hottest subfield of economics. With long, wild, white hair, Minsky
was closer to the counterculture than to mainstream economics. He was, recalls the economist L. Randall
Wray, a former student, a “character.”
So while his colleagues from graduate school went on to win Nobel prizes and rise to the top of
academia, Minsky languished. He drifted from Brown to Berkeley and eventually to Washington University.
Indeed, many economists weren’t even aware of his work. One assessment of Minsky published in 1997
simply noted that his “work has not had a major influence in the macroeconomic discussions of the
last thirty years.”
Yet he was busy. In addition to poverty, Minsky began to delve into the field of finance, which
despite its seeming importance had no place in the theories formulated by Samuelson and others. He
also began to ask a simple, if disturbing question: “Can ‘it’ happen again?” - where “it” was, like
Harry Potter’s nemesis Voldemort, the thing that could not be named: the Great Depression.
In his writings, Minsky looked to his intellectual hero, Keynes, arguably the greatest economist
of the 20th century. But where most economists drew a single, simplistic lesson from Keynes - that
government could step in and micromanage the economy, smooth out the business cycle, and keep things
on an even keel - Minsky had no interest in what he and a handful of other dissident economists came
to call “bastard Keynesianism.”
Instead, Minsky drew his own, far darker, lessons from Keynes’s landmark writings, which dealt
not only with the problem of unemployment, but with money and banking. Although Keynes had never
stated this explicitly, Minsky argued that Keynes’s collective work amounted to a powerful argument
that capitalism was by its very nature unstable and prone to collapse. Far from trending toward some
magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a
This insight bore the stamp of his advisor Joseph Schumpeter, the noted Austrian economist now
famous for documenting capitalism’s ceaseless process of “creative destruction.” But Minsky spent
more time thinking about destruction than creation. In doing so, he formulated an intriguing theory:
not only was capitalism prone to collapse, he argued, it was precisely its periods of economic stability
that would set the stage for monumental crises.
Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he
noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers
and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans
are almost always paid on time, businesses generally succeed, and everyone does well. That success,
however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope
of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.”
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled
by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would
cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose
income could cover neither, and could only pay their bills by borrowing still further. As these latter
categories grew, the overall economy would shift from a conservative but profitable environment to
a much more freewheeling system dominated by players whose survival depended not on sound business
plans, but on borrowed money and freely available credit.
Once that kind of economy had developed, any panic could wreck the market. The failure of a single
firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide
attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create
an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse
first, as they lost access to the credit they needed to survive. Even the more stable players might
find themselves unable to pay their debt without selling off assets; their forced sales would send
asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start
to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that
depended on the now-collapsing financial system.
From the 1960s onward, Minsky elaborated on this hypothesis. At the time he believed that this
shift was already underway: postwar stability, financial innovation, and the receding memory of the
Great Depression were gradually setting the stage for a crisis of epic proportions. Most of what
he had to say fell on deaf ears. The 1960s were an era of solid growth, and although the economic
stagnation of the 1970s was a blow to mainstream neo-Keynesian economics, it did not send policymakers
scurrying to Minsky. Instead, a new free market fundamentalism took root: government was the problem,
not the solution.
Moreover, the new dogma coincided with a remarkable era of stability. The period from the late
1980s onward has been dubbed the “Great Moderation,” a time of shallow recessions and great resilience
among most major industrial economies. Things had never been more stable. The likelihood that “it”
could happen again now seemed laughable.
Yet throughout this period, the financial system - not the economy, but finance as an industry
- was growing by leaps and bounds. Minsky spent the last years of his life, in the early 1990s, warning
of the dangers of securitization and other forms of financial innovation, but few economists listened.
Nor did they pay attention to consumers’ and companies’ growing dependence on debt, and the growing
use of leverage within the financial system.
By the end of the 20th century, the financial system that Minsky had warned about had materialized,
complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers
who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning
of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy,
his predictions started to look a lot like a road map.
“This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”
Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers
that rereading Minsky’s 1986 “masterpiece” - “Stabilizing an Unstable Economy” - “helped clear my
mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights - Paul
Krugman and Brad DeLong - both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning
Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read
Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying
to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky
were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a
terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another
depression [won’t] cure.”
But does Minsky’s work offer us any practical help? If capitalism is inherently self-destructive
and unstable - never mind that it produces inequality and unemployment, as Keynes had observed -
After spending his life warning of the perils of the complacency that comes with stability - and
having it fall on deaf ears - Minsky was understandably pessimistic about the ability to short-circuit
the tragic cycle of boom and bust. But he did believe that much could be done to ameliorate the damage.
To prevent the Minsky moment from becoming a national calamity, part of his solution (which was
shared with other economists) was to have the Federal Reserve - what he liked to call the “Big Bank”
- step into the breach and act as a lender of last resort to firms under siege. By throwing lines
of liquidity to foundering firms, the Federal Reserve could break the cycle and stabilize the financial
system. It failed to do so during the Great Depression, when it stood by and let a banking crisis
spiral out of control. This time, under the leadership of Ben Bernanke - like Minsky, a scholar of
the Depression - it took a very different approach, becoming a lender of last resort to everything
from hedge funds to investment banks to money market funds.
Minsky’s other solution, however, was considerably more radical and less palatable politically.
The preferred mainstream tactic for pulling the economy out of a crisis was - and is - based on the
Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized
labor - by building a new high-speed train line, for example.
Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled
first. The government - or what he liked to call “Big Government” - should become the “employer of
last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It
would be paid to workers who would supply child care, clean streets, and provide services that would
give taxpayers a visible return on their dollars. In being available to everyone, it would be even
more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone
who was able to work. Such a program would not only help the poor and unskilled, he believed, but
would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers
from falling too precipitously, and sending benefits up the socioeconomic ladder.
While economists may be acknowledging some of Minsky’s points on financial instability, it’s safe
to say that even liberal policymakers are still a long way from thinking about such an expanded role
for the American government. If nothing else, an expensive full-employment program would veer far
too close to socialism for the comfort of politicians. For his part, Wray thinks that the critics
are apt to misunderstand Minsky. “He saw these ideas as perfectly consistent with capitalism,” says
Wray. “They would make capitalism better.”
But not perfect. Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that
perfection, like stability and equilibrium, are mirages. Minsky did not share his profession’s quaint
belief that everything could be reduced to a tidy model, or a pat theory. His was a kind of existential
economics: capitalism, like life itself, is difficult, even tragic. “There is no simple answer to
the problems of our capitalism,” wrote Minsky. “There is no solution that can be transformed into
a catchy phrase and carried on banners.”
It’s a sentiment that may limit the extent to which Minsky becomes part of any new orthodoxy.
But that’s probably how he would have preferred it, believes liberal economist James Galbraith. “I
think he would resist being domesticated,” says Galbraith. “He spent his career in professional isolation.”
The positive feedback loop in inherent the environment dominated by large transnationals
which funnel their excess cash into the financial system to speculate on asset appreciation.
As analysis in "The
Endless Crisis" suggests ( updating the classic 1960s analysis of the U.S. economy given by Paul
Sweezy and Paul Baran in "Monopoly Capital.") that the global economy is controlled by large
oligopolistic firms. Which boost their profits by lowering their costs and suppressing wages(on global
scale), using computerization, automation and relocating production to cheap-labor countries such
as China. Wage suppression in turn created permanent weak global demand. Which in turn dry
ups investment opportunities in expansion of existing manufacturing facilities. That forces transnationals
to funnel their excess cash into the financial system to speculate on asset appreciation. As
a result we have "permanent recession" punctuated by boom and bust cycles in financial markets.
Nature of leverage is such that it always represent a positive feedback loop. And leverage
is the essence of
banking operations. In the absence of negative control loops in a form of regulation,
purges, exiles, etc, financial system eventually loses stability which demonstrate itself in financial
crisis. Deep financial crisis often are followed by stagnation and can turn into social crisis.
The economy finds itself in a "stagnation-financialization trap" in which the only way to stimulate
growth is through the financialization process which leads to the next bubble and the next financial
crisis. Policy makers in Western countries are ready and willing to lead the world off this
cliff: "Restoring the conditions for finance-led expansion has now become the immediate object of
economic policy in the face of a persistently stagnation-prone real economy."(Foster and McChesney,
p 47). The authors add, "Not only have financial crises become endemic, they have also been growing
in scale and global impact." (Foster and McChesney, 43)
It is very difficult to gain a greater understanding of the broad social forces at play that
are shaping the financial sector, but self-destructing tendencies of the latter can be established
beyond reasonable doubt. And the problem here is not with people, although, again, I would
like to stress that a lot of financial actors are as close to psychopaths/sociopaths as one
can get. But people are better then institutions as Prince Kropotkin once remarked. The problem
is with reshaping of institutions via weakening of regulations (up to the total absence of thereof).
Regulations represent genome that guides growth and proliferation of organizational entities much
like cells in human organism. Bad genome creates cancer cells that kills the host. This
analogy with financial sector converting into cancer under a weak regulatory regime is less superficial
that one might think from the first sight. Some see the cycle in which financial sector undermines
economy the following way:
Boost Phase of Credit Expansion. Banks became dominant political force and start to
dictate the government policy.
Deregulation. Banks create for the themselves the "most favorable entity" regime including
access to government funds and taxation. Here revolving door greatly helps (see
Corruption of Regulators)
Overextended Credit Expansion and Over Capacity (dot-com bubble)
Growing Malinvestment ( there are no alternatives and one burst bubble is simply replaced
by the next. For example, dot-com bubble with the housing bubble in the case of the USA)
Impaired Debt and Policy Decisions, such as bailout of TBTF at taxpayer expense and
great cost for the economy. Please note that at this point banks have total political control,
so they essentially bail themselves out at the expense of the society.
Stalled Consumption due to shrinking of middle class and high structural unemployment.
The growing bills are passed on plebs. Cheap Money are Offered as the only Panacea Available.
Shrinking Loans and another round of Bank Speculation, this time in natural resources.
Search for Yield from Shrinking Pool of Productive Assets. Increasingly speculative
investments with high risk
Stagnation - Over-indebted economy, massive overcapacity with limited growth.
The growth of nationalism and protectionism (ref. 1920's -> 1930's). Military Keynesianism.
Oligarchy don't hesitate to sacrifice millions of plebeians in the subsequent wars that always
In financial markets, socially-responsible, rational behavior isn’t optimal. That makes
reckless, self and society endangering behavior not a deviation, but a norm. That makes finance a
close relative to organized crime. In this respect Jefferson famous quote "I believe that banking
institutions are more dangerous to our liberties than standing armies" is really prophetic.
Instability is an immanent feature of dynamic systems with positive feedback loops. Financial
sector introduces a dangerous positive feedback loop into economy precipitating bubbles and subsequent
crisis. Despite artful packaging, the banking industry game is very simple, namely, they
take outsized, leveraged risks and when they work out, pay themselves handsome rewards, and when
they don’t, dump them on the taxpayer. That's why asJohn Kenneth Galbraith aptly noted "Finance
is the Achilles' heel of capitalism." While there are multiple levels and multiple meaning
on each level of this statement, instability of dynamic systems with positive feedback
loops is a fundamental property of such systems and it cannot be changed by any superficial
measures not related to the strength of feedback loop.The "inherently procyclical"
nature of the financial systemimplies thatthat perceptions of value and risk develop in parallel. Bankers always suffer from a blindness
to future dangers that are intrinsic to the system because that stand in a way of getting outsized
profits. The better the economy is doing, the higher the ratings issued by the rating agencies,
the laxer the guidelines for approving credit, the easier it becomes to borrow money and the greater
the willingness to assume risk.
Wall Street execs have been whining for two years that to reduce pay incentives and bonuses
would cost the firms their best talent. The government’s response should be YES! That’s precisely
the idea. Finance was once a means to an end: the growth of the real economy. Banking once served
industry and services. Now finance has become the end, and the real economy is subservient
to financial services (it’s no surprise that after the crisis, over-the-counter derivatives
trading quickly climbed back up to more than $600 trillion). “At some point in our recent past,
finance lost contact with its raison d’être,” European Central Bank chief Jean Claude Trichet
said earlier this year. “Finance developed a life of its own…Finance became self-referential.”
Computers brought innovations into financial markets, but at the same time greatly strengthened
and enhanced positive feedback loops inherent in financial sector. In other words
they make financial players much more dangerous for society then before. Our present system
could not exist without Web-based brokers, indexes, CDO’s, tranches, MERS, high speed trading. Computers
also have allowed dramatic increase of complexity, which often is used to hide the most dangerous
and the most reckless behavior of financial players. Computers are become an integral part of the
feedback and add gain (amplification) to the loop. The gain from computers is not bad by itself but
the trend to remove all controls or attenuations while adding this gain is bound to cause instability.
HFT seems to me one of the more obvious and stupid examples.
Complexity and luck of transparency are central to financial services firm rent seeking.
Those opportunities dramatically increases with computerization of finance and invention of complex
financial instruments. It is interesting that other industries can be allowed to teeter and
fall - steel, railroads, automobiles - but banks are considered sacrosanct. If they are, then
they should be public utilities, but good luck with this idea in captured Congress.
Megabanks automatically become an instrument for acquiring and keeping political influence
for its management ("silent coup"). Financial sector became viewed by the elite as a
solution to stagnation of industrial production and the way to fend of international competitors
playing of the US role of suppliers of global currency. As a result financial sector became a formidable
political force. Like senator Durbin put it:
And the banks -- hard to believe in a time when we're facing a banking crisis that many of
the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the
That compensates their inefficiency in internal market. Investment banks understand pretty well
that the best investment with highest return is an investment in political capital.
Saving oversized banks, however, may ruin a country’s public finances (Gros
and Micossi 2008). Take the example of Ireland; this country provided extensive financial
support to its large banks and subsequently had to seek financial assistance from the EU and the
IMF in 2010. The public finance risks posed by systemically large banks suggest that such banks
should be reduced in size.
Further evidence against big banks can be found from studies on banking technologies. Berger
and Mester (1997) estimate the returns to scale in US banking using data from the 1990s, to find
that a bank’s optimal size, consistent with lowest average costs, would be for a bank with around
$25 billion in assets. Amel et al. (2004) similarly report that commercial banks in North
America with assets in excess of $50 billion have higher operating costs than smaller banks. These
findings together suggest that today’s large banks, with assets in some instances exceeding $
1 trillion, are well beyond the technologically optimal scale.
Flawed incentives. The relationship between the rating agencies and big banks is a perfect
case study of flawed incentives and positive feedback loop within financial sector. Agencies
were unduly influenced (aka "were puppets of") by the institutions whose products they were grading.
Financial markets never play a purely passive role; they seek a political role and always
try to actively affect so-called fundamentals they are supposed to reflect. Their lobbying
efforts and regulatory capture are part of positive feedback loop that increases risks and
instability of the financial system. They tend to convert economy into what is using analogy
with military industrial complex can be called the crony capitalist financial-regulatory complex.That means that the necessary contraction of hypertrophied financial sector requires difficult
political changes which captured political establishment is unable to pursue on their own, so changes
often come packaged with violence. As Soros stated:
"These two functions that financial markets perform work in opposite directions. In
the passive or cognitive function, the fundamentals are supposed to determine market prices. In
the active or manipulative function market, prices find ways of influencing the fundamentals.
When both functions operate at the same time, they interfere with each other. The supposedly independent
variable of one function is the dependent variable of the other, so that neither function has
a truly independent variable. As a result, neither market prices nor the underlying reality is
fully determined. Both suffer from an element of uncertainty that cannot be quantified.
I call the interaction between the two functions reflexivity. Frank Knight recognized
and explicated this element of unquantifiable uncertainty in a book published in 1921,
but the Efficient Market Hypothesis and Rational Expectation Theory have deliberately ignored
it. That is what made them so misleading."
The Fiat-based currencies has additional built-in instability risks in comparison with gold
based currencies. This is not to say that gold based currencies are better. But the
ability of the US to run record current-account deficits over the past several decades is one such
effect, the effect impossible in gold standard currency environment and the US political elite (Republican
and Democrats alike) became increasingly comfortable with overconsumption. (The
World’s Financial System Has Become Unstable):
Leading Bush administration officials used to talk of the US current-account deficit being
a “gift” to the outside world. But, honestly, the US has been overconsuming – living far beyond
its means – for the past decade. The idea that tax cuts would lead to productivity gains and would
pay for themselves (and fix the budget) has proved entirely illusory. ...
[T]he net flow of capital is from emerging markets to the US – this is what it means to have
current-account surpluses in emerging markets and a deficit in the US. But the gross flow of capital
is from emerging market to emerging market, through big banks now implicitly backed by the state
in both the US and Europe. From the perspective of international investors, banks that are “too
big to fail” are the perfect places to park their reserves – as long as the sovereign in question
remains solvent. But what will these banks do with the funds?
When a similar issued emerged in the 1970’s – the so-called “recycling of oil surpluses” –
banks in Western financial centers extended loans to Latin America, communist Poland, and communist
Romania. That was not a good idea, as it led to a massive (for the time) debt crisis in 1982.
We are now heading for something similar, but on a larger scale. The banks and other financial
players have every incentive to load up on risk as we head into the cycle; they get the upside
(Wall Street compensation this year is set to break records again) and the downside goes to taxpayers.
Financial deregulation logically leads to over-trading and under-investment creating bubbles
and converting the economy into casino capitalism. The recent the ‘flash crash’ as a clear example
of the bubble and subsequent fragility such over-trading can create. Excessive trading in securities
increases instability of the economic system and creates perverted incentives for many economic actors.
The effect is similar to how drugs and alcohol chemically alter the personality, increasing the value
of instant gratification. As Hyman Minsky noted:
“In a world of businessmen and financial intermediaries who aggressively seek profit, innovators
will always outpace regulators; the authorities cannot prevent changes in the structure of portfolios
from occurring. What they can do is keep the asset-equity ratio of banks within bounds by setting
equity-absorption ratios for various types of assets. If the authorities constrain banks and are
aware of the activities of fringe banks and other financial institutions, they are in a better
position to attenuate the disruptive expansionary tendencies of our economy.”
-- Hyman Minsky, 1986
Growth of inequality connected with emergence of hypertrophied financial sector is another
positive feedback loop. Outsized pay in financial sector attracts talent and this talent
is used for destructive (or at least non-constructive) purposes. This is the situation similar to
the poor countries problem with mafia. What is so destabilizing isn’t just the high guaranteed pay
if you can break in (even though that is a huge part of it) but the allure of obscene sums of money
if you can make it to the top.
The share of US national income going to the top 1 per cent of the income distribution has risen
from 15 to 25 per cent over the past decade, mostly because of the growth in size and profitability
of the financial sector. This payments to the top percentile is a tax paid by the population (similar
to what population paid to royalty and church in middle ages) as a whole for the questionable
benefits of living in the casino capitalism economy. While the key to growth of inequality was financial
sector it also complemented by several additional trends:
Dramatic increase of renumeration of top management in all types of companies : by
increasing number of sociopath in higher echelons of financial institutions and second by destroying
morale of the firm which makes reckless moves more probable.
Due to regulatory capture. Concentrated wealth makes it easier to buy deregulation
to free itself up even more. At the same time concentrated wealth of financial sector finds fewer
productive investment outlets and naturally migrates into destructive speculation, including creating
huge speculative global capital flows. A positive feedback loop in which increase of income inequality
increase "financization" of the economy looks like:
Increase of income inequality ->
Inadequate effective demand in non-financial economy ->
Inadequate investment opportunities in non-financial economy ->
Investments flowing into parasitic financial “creativity”...
Regulatory capture, especially complete capture of the Fed (with NY Fed widely considered
to be a branch of Goldman Sachs) and SEC nullifies enforcement and creates another positive
feedback loop. "Revolving doors" provide an excellent opportunity to buy influence without overt
corruption. One recent example is Peter Orzag accepting position in Citi (Why
Citigroup) And that means that while on the job ambitious people might try to avoid to aggravate
banks. But without strong regulatory oversight banks very quickly convert themselves into wonder
machines that provides astronomic returns to brass and selected employees, high returns to
creditors, while at the end of each cycle causing huge losses to taxpayers. Banks must keep up
with their competitors, and if one does some wonder trick with somebody else money, they all must
do it to stay in business. That is why regulation is so vital in this highly competitive sector.
One cannot be virtuous as a commercial entity with obligations to shareholders and customers under
brothel rules. That why Greenspan
as an apostle of deregulation was so destructive for the US economy. This is another positive feedback
loop that feeds on itself. In search of profits which became more scares as financization takes life
out of real economy, financial firms are prone to subvert safeguards and endanger the very society
in which they operate ("financial terrorism effect". Wealth permits financial sector
to remove "sand in the wheels": vital for stability negative feedback loops in form of regulation
and, what is actually more important, strict law enforcement of existing regulations. Here
is a quote from Yves Smith post
Should the Fed Be Independent-
But there has been another thread mixed in with this: resentment at the Fed salvaging the banking
industry, with contingent and real costs, in the form of higher inflation, per
Alford’s and Leijonhufvud’s analysis. Now that many of those actions may indeed have been
the best among a set of bad choices (although I suspect economic historians will conclude the
Fed cut rates too far too fast). However, the big issue is that they involved consequences of
such magnitude that they should not have been left to the Fed. I was amazed, and was not alone,
when Congress did not dress down the Fed in its hearings on the Bear rescue for the central bank’s
unauthorized encroachment into fiscal action (ie., if any of the $29 billion in liabilities assumed
by the Fed in that rescue comes a cropper, the cost comes from the public purse). So the frustration
isn’t merely about outcomes, it’s about process, about the sense of disenfranchisement. And that
will only get worse as this crisis grinds along.
The proliferation of speculative side bets in the form of naked credit default swaps and other
derivatives can have significant negative effects on economic fundamentals such as the terms of financing,
the patterns of project selection, and the incidence of corporate and sovereign default. The
existence of zero-sum side bets on default has major economic repercussions. It has strangulating
effect starving real economy of funds as investors who are optimistic about particular company or
state instead of funding it sell protection. This diverts their capital away from potential borrowers
and channels it into collateral to support speculative positions. Naked CDSs are insurance policies
bought against some other persons property. Such as, I buy a policy against your house. Insurance
companies do not write such policies because I might decide to burn your house down. But even if
we assume that there will be no intentional damage to other’s property, we still are encouraging
diverting of funds. See
Guest Post Economic consequences of speculative side bets – The case of naked CDS « naked capitalism.
They also can create artificial demand. Conservative analyses indicates that in the peak years of
2006 and early 2007, Magnetar’s program drove the demand
for roughly 35% of subprime bonds. That fact refutes the claim that all derivatives, futures,
options and swaps are zero sum game: one person loss is another person gain.
By its nature investment banking is constantly tempted to move into grey zone and then slide
into criminal behavior. There is a profound similarity between investment bankers
and hedge funds "Masters of the Universe" and hackers. Investment bankers play a similar role in
financial system as hackers play in computer networks: they are engaged in systemic effort to undermine
existing laws and security controls. But there one important difference: investment bankers are often
obscenely rich and can buy themselves freedom after being caught. That's why criminal law should
consider financial sector crimes similar to the organized crime. "Algorithmic Terrorism”
( HFT) is one example (Nanex
- Market Crop Circle Of The Day). Nobody went to jail (yet). When you see the kind of losses
we have seen on AAA rated securities for example it is almost certainly there was there was some
kind of fraud involved. In fact growth of investment banking tend to be accompanied by large scale
fraud so this would not be unusual.
Tremendous political power that finance sector acquired due to outsized profits is channeled
toward lobbing that is socially and economically disruptive. Externalities produced by
unregulated banking sector are dangerous for society, but at the same time political power of the
financial sector created a lock in which prevents any meaningful correction. Classic Greek Tragedy
necessary follows. Regulators – and their superiors in the legislative and executive branches
– were captured both intellectually and via implicit form of corruption known as revolving doors.
"To a surprising degree, economic misfortune has correlated with low top marginal tax rates. The
top marginal tax rate at the time of the 1929 crash was 24%. After his election, Roosevelt promptly
raised it to 63% and then to 94%, and one could easily make the case that it was this rise, rather
than financial regulation, that played the primary — though certainly not the only — role in curbing
abuses by attacking greed at its source, without, by the way, damaging the economy. Roosevelt essentially
taxed away big money."
Disincentivizing greed - Page 3 - Los Angeles Times
For financial sector stability is destabilizing. Minsky financial instability hypothesis
can be simplified to the general statement that in any economy with large financial sectorstability is destabilizing as financial firms try to exploit the stable regime to extract
additional profit by increasing leverage and making excessively risky bets which serves as a tax
on real economy, strangulating it and creating the necessity for even more risky bets and higher
leverage. In the latter case large firms also implicitly transfer their risks to larger society (via
The cost of financial intermediation is ultimately a tax on commerce.Outsized,
predatory financial services sector poses real danger to viable businesses, to business expansion,
and to general economic productivity. Large part of activity of financial sector, especially
connected with securitized products, futures, options and derivatives is parasitic: "Banks tend to
make profits – or more accurately, extract rents – out of all proportion to any contribution they
make to the wider economy." Excessive rents weaken the real economy similar to cases
when parasite weakens the host (The
Banking Oligarchy Must Be Restrained For a Recovery to Be Sustained ). In addition to the
overhang of unindicted and undeclared fraud which is widespread due to regulatory capture, distorting
the clearing of the markets, an oversized financial sector essentially make the sum of government
tax and Wall street tax a real drag on the economy. The percentage of financial sector profits to
corporate profits recently peaked at 41%. This suggests that the scope of parasitic financial activity
is a real killer for the economy.
Weakly regulated banks tend to become classic cases of market failure and their employees
at the senior level have basically become the biggest bank robbers of all time. This tremendous
transfer of wealth is inherent in growth of financial sector. The best way to rob bank is to own
Academia serves as the Fifth column of the financial sector. The financial system can
brainwash society via control of corrupt academia in classic Lysenkoism scenario. Here is relevant
quote from The Quiet
Wall Street’s seductive power extended even (or especially) to finance and economics
professors, historically confined to the cramped offices of universities and the pursuit of Nobel
Prizes. As mathematical finance became more and more essential to practical finance, professors
increasingly took positions as consultants or partners at financial institutions. Myron Scholes
and Robert Merton, Nobel laureates both, were perhaps the most famous; they took board seats at
the hedge fund Long-Term Capital Management in 1994, before the fund famously flamed out at the
end of the decade. But many others beat similar paths. This migration gave the stamp of academic
legitimacy (and the intimidating aura of intellectual rigor) to the burgeoning world of high finance.
Reaganomics (and later Rubonomics) confused ends with means... As Stiglitz noted,
. ... a financial sector is a means to a more productive economy, not an end in itself. (Financial
a better measure of well-being). Attempt to convert the USA into new Switzerland on the
strength of dollar as a reserve currency was doomed from the beginning due to the country size constrains.
Highly leveraged economies are prone to deep and prolong crisis. "The lesson of history,
then, is that even as institutions and policy makers improve there will always be a temptation to
stretch the limits. ... If there is one common theme to the vast range of crises ... it is that excessive
debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses
greater systemic risks than it seems during a boom. ... Highly indebted governments, banks, or corporations
can seem to be merrily rolling along for an extended period, when bang -- confidence collapses, lenders
disappear and a crisis hits. ... Highly leveraged economies ... seldom survive forever ... history
does point to warnings signs that policy makers can look to access risk -- if only they do not become
too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries,
'This time is different' Carmen Reinhart and Kenneth Rogoff (cited from
The first thing to understand is that attempt to weaken positive feedback looks via regulation, approach
that can be called “regulation as a Swiss knife” does not work without law enforcement and criminal
liability for bankers, as there is an obvious problem of corruption of regulators. In this sense the
mechanism of purges might be the only one that realistically can work.
In other words it’s unclear who and how can prevents the capture of regulators as financial sector
by definition has means to undermine any such efforts. One way this influence work is via lobbing for
appointment of pro-financial sector people in key positions. If such "finance-sector-selected" Fed chairman
does not like part of Fed mandate related to regulation it can simply ignore it as long as he is sure
that he will be reappointed. That happened with Greenspan. After such process started it became
irreversible and only after a significant, dramatic shock to the system any meaningful changes can be
instituted and as soon as the lessons are forgotten work on undermining them resumes.
In essence, the Fed is a political organization and Fed Chairman is as close to a real vice-president
of the USA as one can get. As such Fed Chairman serves the elite which rules that country, whether
you call them financial oligarchy or some other name. Actually Fed Chairman is the most powerful unelected
official in the USA. If you compare this position to the role of the Chairman of the Politburo
in the USSR you’ll might find some interesting similarities.
In other words it is impossible to prevent appointment of another Greenspan by another Reagan without
changes in political power balance. And the transition to banana republic that follows such appointment
is irreversible even if the next administration water boards former Fed Chairman to help him to write
his memoirs. That means that you need to far-reaching reform of political system to be able to
regulate financial industry and you need to understand that the measures adopted need vigilant protection
as soon as the current crisis is a distant history.
Several other source of financial instability were pointed out by others:
The logic of markets gets extended to “fictitious commodities” – land, labor, and money.Polanyi (1944) famously zeroed in on the way that the logic of markets gets extended to
“fictitious commodities” – land, labor, and money – and the way that society reacts defensively
to that illegitimate extension. Today, arguably, it is the logic of finance that has been so extended,
turning everything it touches into an asset with a speculative price.
Excessive accumulations of financial wealth – “other people’s money” – tend to undermine democratic
political forms.Brandeis (1914) thought that excessive accumulations of financial
wealth – “other people’s money” – tend to undermine democratic political forms (among other
problems). Today, arguably TBTF financial institution threaten democracy.
There are some outstanding lectures and presentation on YouTube on this topic. Among them:
While it is stupid to argue that neoliberalism does not exist: it exits both as ideology, economic theory and politicl
pratice (much like Marxism before it; yet another "man-made" ideology -- actually a variation of Trotskyism, this discussion does
illuminate some interesting and subtle points.
"... Neoliberalism is a time-limited global system sustained by coercive imposition of competitive behaviour, parasitic finance & privatisation. ..."
"... But it's better to think of neoliberalism as a bunch of arrangements ("system" if you remove connotations of design) rather than as an ideology. Ed has a point when he says that almost nobody fully subscribes to "neoliberal ideology": free market supporters, for example, don't defend crony capitalism. ..."
"... Perhaps the texts of transnational trade treaties might be the best place to search for a de facto definition of neoliberalism. ..."
"... Whether or not the present neoliberal system is the result of a single coherent ideology, it emerged from the 70s on as a set of related (if not deliberately coordinated) responses to the structural crises of the older postwar Keynesian system. And there was definitely a cluster of policy-making elites in the early 70s making similar observations about the failure of consensus capitalism. ..."
"... It is possible to have 'hard' and 'soft' neoliberalism depending on whether the state employs 'carrots' or 'sticks', but essentially almost the entire UK political system agreed that 'There Is No Alternative' until Corbyn became Labour leader. ..."
"... I think Will Davies has hit the spot with his definition of neoliberalism as "the disenchantment of politics by economics". In other words, neoliberalism is first and foremost a political praxis, not an economic theory. It is about power, hence the continuing importance of the state. ..."
"... That is the Great Transformation and neoliberalism as its current phase are about turning institutions into businesses (including marriage), and part of this is "managerialism". This is not done because businesses are inherently better for every purpose than institutions, but because businesses are better vehicles than institutions for tunnelling (looting) by their managers. ..."
"... Neo-liberals are not opposed to all types of government intervention. But like neo-classical economists, they believe ultimately in the price mechanism to allocate resources - in the long run, if not the short. ..."
"... In terms of sincerity, Milton Friedman asserted in "Capitalism and Freedom" that the more a society was "free market," the more equal it was. Come the preface to 50th anniversary edition, he simply failed to mention that applying his own ideology had refuted his assertion (and it was an assertion). ..."
"... Neo-liberalism never been about reducing "the State" but rather strengthening it in terms of defending and supporting capital. Hence you see Tories proclaim they are "cutting back the state" while also increasing state regulation on trade unions -- and regulating strikes, and so the labour market. ..."
"... Somewhere along the line neo-liberalism got associated with austerity and small-government policies. The latter I think was because they are (correctly) associated with promoting privatisation and deregulation policy. ..."
"... But the market is the creation of man. It has no power, no judgement, other than that bestowed on it by us. My problem with neoliberalism is the belief that decisions can be made on the basis of a money metric whereas we know that money is not necessarily a good measure of value. ..."
"... Neoliberalism is real, but only describes background theoretical claims. It is wrong to apply the term to the broader political movement it supported. The political movement was dedicated to maximizing the power and freedom of action of large-scale capital accumulators. Lots of ideas from neoliberal intellectual argumentation were used to increase the power of capital accumulators, and neoliberal economists tended to ignore many aspects of the political movement they supported (strongr state power, crony capitalism, monopoly power) not strictly part of neoliberal theory ..."
"... usually the theory was just a weapon used in internal battles or as a PR tool to mask less savory political objectives. ..."
"... Repeating the message: "neoliberalism" has a pretty much official definition, the "Washington Consensus". And the core part of the "Washington Consensus" is "labour market reform", that is in practice whichever policies make labour more "competitive" and wages more "affordable". ..."
"... The "free markets" of neoliberalism are primarily "free" labour markets, that is free of unions. ..."
"... I would argue that, in terms of practical working definitions, Max Sawicky's definition of neo-liberalism seems to work well, at least in the U.S. context (second half of post): https://mikethemadbiologist.com/2017/04/28/remember-the-victims-of-the-nebraska-public-power-district/ ..."
Is neoliberalism even a thing? This is the question posed by Ed Conway, who
it is "not an ideology but an insult." I half agree.
I agree that the economic system we have is "hardly the result of a guiding ideology" and more the result of "happenstance".
I say this because neoliberalism is NOT the same as the sort of free market ideology proposed by Friedman and Hayek. If this were
the case, it would have died on 13 October 2008 when the government bailed out
In fact, though, as Will
and Adam Curtis
have said, neoliberalism entails the use of an active state. A big part of neoliberalism is the use of the state to increase the
power and profits of the 1% - capitalists and top managers. Increased managerialism, crony capitalism and tough benefit sanctions
are all features of neoliberalism. In this respect, the EU's treatment of Greece was neoliberal – ensuring that banks got paid at
the expense of ordinary people.
I suspect, though, that measures such as these were, as Ed says, not so much part of a single ideology as uncoordinated events.
Tax cuts for the rich, public sector outsourcing and target culture, for example, were mostly justified by appeals to efficiency,
and were not regarded even by their advocates as parts of a unified theory. To believe otherwise would be to subscribe to a conspiracy
theory which gives too much credit to Thatcher and her epigones.
Neoliberalism is a time-limited global system sustained by coercive imposition of competitive behaviour, parasitic finance
I'm not sure about that word "system". Maybe it attributes too much systematization to neoliberals: perhaps unplanned order would
be a better phrase. But it's better to think of neoliberalism as a bunch of arrangements ("system" if you remove connotations
of design) rather than as an ideology. Ed has a point when he says that almost nobody fully subscribes to "neoliberal ideology":
free market supporters, for example, don't defend crony capitalism.
And it's useful to have words for economic systems. Just as we speak of "post-war Keynesianism" to mean a bundle of policies and
institutions of which Keynesian fiscal policy was only a small part, so we can speak of "neoliberalism" to describe our current arrangement.
It's a better description than the horribly question-begging "late capitalism".
This isn't to say that "neoliberalism" has a precise meaning. There are varieties of it, just as there were of post-war Keynesianism.
Think of the word as like "purple". There are shades of purple, we'll not agree when exactly purple turns into blue, and we'll struggle
to define the word (especially to someone who is colour-blind). But "purple" is nevertheless a useful word, and we know it when we
If neoliberalism is a system rather than an ideology, what role does ideology play?
I suspect it's that of post-fact justification.
Put it this way. In the mid-80s nobody argued that the share of GDP going to the top 1% should double. Of course, many advocated
policies which, it turns out, had this effect. Some of them intended this. But those policies were justified on other grounds, often
sincerely. Instead, the belief that the top 1% "deserve" 15% of total incomes rather than 7-8% has mostly followed them getting 15%,
not led it. A host of cognitive biases – the just world illusion,
effect and status quo bias underpin
an ideology which defends inequality. John Jost calls this system
justification (pdf) . You can gather all these biases under the umbrella term "neoliberal ideology" if you want. But it follows
economic events rather than is the creator of them.
So, I half agree with Ed that neoliberalism isn't a guiding ideology. But I also agree with Paul, that it is a way of describing
a particular economic system.
I don't, however, want to get hung up on words: I'd rather leave such pedantry to the worst sort of academic. What's more important
than language is the brute fact that productivity and hence real incomes for most of us have
stagnated for years. In this sense, our existing economic system has
failed the majority of people. And this is true whatever name you give it.
if it's a way of describing the prevailing economic system, does it make sense to describe people as neoliberals? Does that imply
that everyone who is not a radical revolutionary (i.e. anyone who if they got their way in government would still be within normal
variation in policies from a USA Republican administration to the Danish Labour party?). So the Koch brothers are neoliberals
and Brad De Long is a neoliberal despite them disagreeing vehemently about most things?
I know we have lots of other words that are used in wildly inconsistent ways (capitalism, socialism) but I can't help being
irked by the sheer incoherence of the things that neoliberals are accused of. Most recent example to come to mind, somebody in
conversation with Will Davies on Twitter claimed neoliberals oppose redistribution (and Will did not correct him). FFS.
'But, despite the fact that neoliberalism is frequently referred to as an ideology, it is oddly difficult to pin down. For
one thing, it is a word that tends to be used almost exclusively by those who are criticising it - not by its advocates, such
as they are (in stark contrast to almost every other ideology, nearly no-one self-describes as a neoliberal). In other words,
it is not an ideology but an insult.'
Well political science and history uses models too. What is the problem of say David Harvey's definition in, A Brief History
of ...that which doesn't exist (2007)?
Rather I think he means it upsets 'main stream' economics professors, to be called this term, and rather than opt for Wren
Lewis gambit (there is such a thing as 'Media Macro' or 'Tory Macro', or 'Econ 101', which I found interesting as it happens)
Conway has gone for pedantry and first year Politics student essentialism, ie what is Democracy? type stuff.
Neoliberalism, at least in the UK, was in part a reaction by Thatcher & Co to the excesses of previous Labour administrations:
excesses in the form of "if an industry looks like going bust, let's pour whatever amount of taxpayer's money into it needed to
save it". Thatcher & Co's reaction was: "s*d that for a lark – the rules of the free market are better than industrial subsidies
(especially industrial subsidies in cabinet ministers' constituencies)"
Whether or not the present neoliberal system is the result of a single coherent ideology, it emerged from the 70s on as a
set of related (if not deliberately coordinated) responses to the structural crises of the older postwar Keynesian system. And
there was definitely a cluster of policy-making elites in the early 70s making similar observations about the failure of consensus
"if it's a way of describing the prevailing economic system, does it make sense to describe people as neoliberals?"
Yes, these are largely people who reacted to the 'series of events' that occurred in the global economy in the 1970s by essentially
accepting a certain set of policies and responses, many of which involved seeking to insulate the state against collective popular
demands, intervening against organised labour, deregulating finance and targeting state intervention towards private business.
It is possible to have 'hard' and 'soft' neoliberalism depending on whether the state employs 'carrots' or 'sticks', but essentially
almost the entire UK political system agreed that 'There Is No Alternative' until Corbyn became Labour leader.
Many of these people were hardly hardcore ideologists but rather pragmatic
or unimaginative types that were unwilling to challenge the 'status quo' or the prevailing economic system, just as there were
very few classical liberals from WWI onwards.
I think Will Davies has hit the spot with his definition of neoliberalism as "the disenchantment of politics by economics". In
other words, neoliberalism is first and foremost a political praxis, not an economic theory. It is about power, hence the continuing
importance of the state.
This instrumentality echoes Thatcher's insistence that "Economics are the method; the object is to change the heart and soul",
which shows that there was more in play in the late-70s and early-80s than simply responding to the "structural crises of the
older postwar Keynesian system".
You should be reading Philip Mirowski instead. The economist and historian of science Philip Mirowski is considered the foremost expert on this subject, he has written many
books on this the latest is:
"The Knowledge We Have Lost in Information: The History of Information in Modern Economics":
Neoliberalism is a philosophy based on the metaphor/idea that the "market" is an information process ad it is quasi-omniscient,
that "knows" more than any and all of us could ever know. It makes certain claims about what "information" is and what a "market"
is. It's mostly started with the Mont Perelin Society think-tank.
"productivity and hence real incomes for most of us have stagnated for years."
But for many, usually people who vote more often or more opportunistically, they have been years of booming living standards.
The core of the electoral appeal of thatcherism is that thatcherites whether Conservative or New Labour have worked hard to
ensure that upper-middle (and many middle) class voters collectively cornered the southern property market, creating a massive
short squeeze on people short housing.
So many champagne leftists of some age talk about policies and concepts, but for the many the number one problem for decades
has been managing to pay rent.
"Neoliberalism is a philosophy based on the metaphor/idea that the "market" is an information process"
Written that wait it evokes Polanyi's "Great transformation" where markets mechanisms have displaced social mechanisms in many
But Just yesterday I realized that Polanyi was subtly off-target: it is not markets-vs-society (two fairly abstract concepts)
but instead institutions-vs-businesses.
That is the Great Transformation and neoliberalism as its current phase are about turning institutions into businesses
(including marriage), and part of this is "managerialism". This is not done because businesses are inherently better for every
purpose than institutions, but because businesses are better vehicles than institutions for tunnelling (looting) by their managers.
"the "market" is an information process ad it is quasi-omniscient, that "knows" more than any and all of us could ever know"
There have been a few books arguing that "the market", being omniscient, all powerful, and just in judging everybody and giving
them exactly what they deserve, has replaced God, and today's sell-side neoliberal Economists are its preachers:
Economists started using the term neo-liberalism a bit later, after it became a derogatory term - and after 2008 began to disassociate
from it (a few, and very few, did after the Asian Financial Crisis).
It is important to realise I think that it is a term that closely linked to political science -- and in particular a branch
of international relations. The person most associated with Neo-liberalism is Francis Fukuyama. What he did was link capitalism
and democracy; both he said had triumphed and because they respect the freedom of individual liberty and they allowed markets,
which are the most efficient way of allocating resources, to operate liberally. Its heyday was at the time of the collapse of
the Berlin Wall - "the end of history" as FF famously said.
Political scientists see neo-classical economics and neo-liberalism as very compatible, because of the formers basic construct
of individual optimisation, rational choice and market efficiency. Often they are grouped together and contrasted with radical
and realist (realpolitik) approaches. For neo-liberals and neo-classicists, markets get prices right, whether they do so with
a lag is a minor point.
Neo-liberals are not opposed to all types of government intervention. But like neo-classical economists, they believe ultimately
in the price mechanism to allocate resources - in the long run, if not the short.
They have no problem with welfare states. Like neo-classical economists they accept the second welfare theorem.
They are pro-globalisation: they don't like international trade, capital or immigration controls. Why? Because they impact
on individual liberty and distort market prices.
International relations were often guiding reasons behind economic policy that were pro-globalisation. By encouraging globalisation,
you were encouraging international capitalism and thereby the spread of democracy (a la Francis Fukuyama). International relations
policy was close to the PM, and run from the Cabinet Office.
I would argue that Blair and Jonathan Portes are prime examples of neo-liberals. And indeed the Clinton/Blair years were quintessentially
neo-liberal in the formerly correct use of the term. Thatcher, as a strong opponent of the welfare state, was not.
One further point. Neo-liberals are progressively and socially liberal, as well as economically liberal. They believe in cosmopolitanism
and diversity and put much emphasis on minority and women's rights.
"In fact, though, as Will Davies and Adam Curtis have said, neoliberalism entails the use of an active state."
It has always been like that -- Kropotkin was attacking Marxists for suggesting otherwise over a hundred years ago.
"In the mid-80s nobody argued that the share of GDP going to the top 1% should double. Of course, many advocated policies which,
it turns out, had this effect. Some of them intended this. But those policies were justified on other grounds, often sincerely."
Yes, different rhetoric was often used -- but the net effect was always obvious, and pointed out at the time. But you get better
results with honey than vinegar...
In terms of sincerity, Milton Friedman asserted in "Capitalism and Freedom" that the more a society was "free market," the
more equal it was. Come the preface to 50th anniversary edition, he simply failed to mention that applying his own ideology had
refuted his assertion (and it was an assertion).
Neo-liberalism never been about reducing "the State" but rather strengthening it in terms of defending and supporting capital.
Hence you see Tories proclaim they are "cutting back the state" while also increasing state regulation on trade unions -- and
regulating strikes, and so the labour market.
"intervening against organised labour" China bans unions, doesn't it? Are they in this tent too?
"targeting state intervention towards private business" not quite sure what that means but pre-1970 import substitution industrial
policy is what?
am I a neoliberal because I think markets do process dispersed information and that competition does some good things (I am
worried about monopolies, I would be worried about non-competitive government procurement) or am I not a neoliberal because I
am nowhere near thinking markets are omniscient and could write long essays on how markets fail?
am I a neoliberal because I think the Washington Consensus is broadly sensible (with some reservations) or not a neoliberal
because I'd like to see far more social housing?
Somewhere along the line neo-liberalism got associated with austerity and small-government policies. The latter I think was
because they are (correctly) associated with promoting privatisation and deregulation policy.
But neo-liberals have never been against welfare states in principle or counter-cyclical policy in principle.
Key-neo-liberals, however, were pro-austerity policy after the Asian Financial Crisis - but this included most of the mainstream
economics establishment (most crucially of all Stanley Fischer at the IMF). Their rational (naturally enough) related to consistency,
credibility, incentives and moral hazard arguments. There were a few who protested (eg Stiglitz). But they were exceptions.
@ Luis Enrique
I don't think you'd make the grade as a 'true' neo-liberal unless you'd be happy for your social housing to be less then optimal
and only for the destitute. Do you see moral hazard if the housing market is once again sidestepped in favour of decent homes
for average every-day heroes, or do you subscribe (explicitly) to the view that the state must sanction and hurt in order that
"There have been a few books arguing that "the market", being omniscient, all powerful, and just in judging everybody and giving
them exactly what they deserve, has replaced God...."
But the market is the creation of man. It has no power, no judgement, other than that bestowed on it by us. My problem with neoliberalism is the belief that decisions can be made on the basis of a money metric whereas we know that
money is not necessarily a good measure of value.
'"intervening against organised labour"
China bans unions, doesn't it? Are they in this tent too?'
Well yes. They have taken it further than most countries, stripping back their welfare system while increasing state promotion
of capitalist development.
'"targeting state intervention towards private business" not quite sure what that means but pre-1970 import substitution industrial
policy is what?'
Import substitution industrial policy is protectionism, not neoliberalism. I'm referring to governments' privatisation and
outsourcing of public services and industries, taking them out of political responsibility and collective provision, while at
the same time providing them with subsidies and guaranteed markets.
Is Productivity Growth like Evolution ?
Is it possible that productivity growth is like evolution: It can be a fortitous accident or it can happen due to competitive
pressure. The fortuitous accidents are the new technologies whose advantages are so obvious they are quickly adopted.
The competitive pressures can be constraints on profits or resources that force greater efficiency. Perhaps, now, in the UK, there is no shortage of reasonably priced personnel, infrastructure and goods. So, if productivity growth is low, you can be certain neither requirement has been met.
If neither requirement has been met, then, it may well be that there is excessive unused capacity and, if that is the case,
GDP growth has been suboptimal.
Which leads to the best question: Is greater GDP growth the result of greater efficiency or is greater efficiency the result
of greater GDP growth?
The conclusion is that it may be a mistake to guide policy under the assumption that GDP growth must he preceded by productivity
growth. Failing to realize this may be a cause of unnoticed suboptimal GDP growth.
1. Neoliberalism is real, but only describes background theoretical claims. It is wrong to apply the term to the broader political
movement it supported. The political movement was dedicated to maximizing the power and freedom of action of large-scale capital
accumulators. Lots of ideas from neoliberal intellectual argumentation were used to increase the power of capital accumulators,
and neoliberal economists tended to ignore many aspects of the political movement they supported (strongr state power, crony capitalism,
monopoly power) not strictly part of neoliberal theory
2. The overlap and confusion between neoliberal theory and the political movement for unfettered freedom for capital accumulator
is consistent with the broader history of movement conservatism. After WW2, conservatives (broadly defined) had a fixation with
developing an intellectual foundatation/justification for their policy preferences. Partly as a reaction to the perception that
FDR-LBJ era liberalism was based on theories published by Ivy League professors. The Mont Pelerin intellectual thread that Mirowski
and others describe was part of this process. But (even for the liberals) it was always a mistake to claim that intellectual/ideological
theorizing lead to political policy and action. It was sometimes the opposite; usually the theory was just a weapon used in internal
battles or as a PR tool to mask less savory political objectives.
3. Democratic neoliberalism (Brad DeLong) was always a totally different animal. It was a reaction to the economic crises of the
70s/80s--New Deal policies written in 1934 didn't seem to be working; maybe would should incorporate market forces a bit more.
At the same time Republican neoliberalism had abandoned all pretense of detached analysis and was now strictly a tool supporting
the pursuit of power.
"Put it this way. In the mid-80s nobody argued that the share of GDP going to the top 1% should double. Of course, many advocated
policies which, it turns out, had this effect. Some of them intended this. But those policies were justified on other grounds,
often sincerely. Instead, the belief that the top 1% "deserve" 15% of total incomes rather than 7-8% has mostly followed them
getting 15%, not led it. "
This is just not true. People did argue that, did announce the intent of these policies in public. Bill Mitchell's former student
Victor Quirk is great on such declarations of war on the poor from the rich throughout history. Mitchell himself wrote that he
was surprised how many and how blatant these declarations were.
"But the market is the creation of man. It has no power, no judgement, other than that bestowed on it by us."
But the neoliberal thesis is that it is all-knowing, all-powerful, all-judging. "vox populi vox dei" taken to an extreme.
"My problem with neoliberalism is the belief that decisions can be made on the basis of a money metric"
That to me seems a very poor argument, because then many will object that ignoring the money metric means that you want someone
else to pay. Consider the statement "everybody has a right to healthcare free at the point of use": it is mere handwaving unless you explain
who and how to pay for it.
The discussion in the money yes/no terms is for me fruitless, because there are two distinct issues in a project: the motivation
for there being the project, and the business of doing the project.
Claiming that the *only* motivation for a project should be money seems to me as bad a claiming that given a good motivation
how to pay for a project does not matter.
Projects don't reduce to their motivation any more than they reduce to the business of doing them.
An extreme example I make is marriage: for me it is (also) a business, as it requires a careful look at money and organization
issues, but hopefully the motivation to engage in that business is not economic, but personal feelings.
That's why I mentioned a better-than-Polanyi duality between businesses and institutions: institutions as a rule carry out
businesses but for non-business motivations, while "pure" businesses have merely economic motivations.
For example a university setup as a charity versus one setup a a business: both carry out business activities, but the motivation
of the former is not merely to do business.
Repeating the message: "neoliberalism" has a pretty much official definition, the "Washington Consensus". And the core part
of the "Washington Consensus" is "labour market reform", that is in practice whichever policies make labour more "competitive"
and wages more "affordable".
The "free markets" of neoliberalism are primarily "free" labour markets, that is free of unions.
@ Blissex "ignoring the money metric means that you want someone else to pay."
Not sure I follow. If payment is made via money then that is not ignoring the money metric, i.e. money as a measure of value.
Do we want someone to do the project and is someone willing and able to do it? If, yes, then money is not (or at least does not
need to be) the constraint. It is a mechanism to facilitate the project. If we want universal healthcare, money is not the constraint,
the constraint is the ability of society to train and sustain (feed and house) the required expertise.
Neo-liberalism is an economic idea based on the conjecture that by reverting the level of state spending and regulation of an
economy to that which existed at an earlier stage of its economic development will produce the same level of economic growth which
the economy experienced then.
But the level of output of an economy is a reflection of the level of the efficiency of that economy, the level of economic
growth therefore reflects the rate of increase in its efficiency in terms of increased economic output as the economy develops,
a measure which inevitably reduces in its order as an economy approaches its maximum level of efficiency and output. So the rate
of economic growth of an economy will inevitably be progressively reduced as an economy matures as the opportunities for efficiency
improvements are exploited and the number that remain diminish.
The level of state spending and regulation typical of economically developed societies are responses to the social change which
economic development itself has brought about. Abolishing those responses therefore is likely only to serve to reintroduce the
social problems which led to their introduction and to make the social consequences of economic development more arduous for the
lower social and economic groups disfavoured by that process of social change.
Neo-liberalism is, like other materialist ideology of the progressive left and right, a predominantly economic idea which is
a product of the affluent and intellectual classes who themselves, being a product of their elevated economic condition, being
dependent upon it and therefore having a vested interest in its continuance, are imbued with a bias which sees the improvement
in the general economic condition as a natural unmitigated good and are therefore oblivious or apathetic to its non-material consequences
as material progress causes a society and its population to diverge from its native and surviving character as it adapts to the
historically exceptional conditions of modernity and undermines its cultural foundation and ultimately threatens its long term
It seems clear from the above posts that there is no clear consensus about what neo-liberalism actually is.
I suggest the use of the term is little more than a cloak used to cover up an uncomfortable reality for those on the left.
Traditional left wing policies, such as nationalisation, state intervention in the economy such as rent controls, high marginal
tax rates, and strong trade unions systematically failed to deliver prosperity. States which moved to economic models involving
more reliance on markets to shift labour and capital to new activities seemed to prosper far better. Rather than say that conservatives
such as Friedman were proved right about the fundamental propositions about how an economy should be organised, the soft left
adopted conservative policies, and have dressed it up as 'neo-liberalism' to save face.
Indeed, some on the left, such as 'filthy rich' Mandelson, embraced the market economy with the zeal of converts, and have
ignored its faults and problems, and have failed to seek to mitigate or remedy these faults and problems.
The best thing to do is consult a first or second year undergraduate political science or international relations text. Burchill
"Theories of International Relations, Palgrave is a good one, and used in many UK universities. There will be a chapter on neo-liberalism
in them. These texts give you the standard blurb on what neo-liberalism really is (as well as what the other major schools of
thoughts are together with critiques of all of them).
Neo-liberalism is very much a coherent (but by no means flawless) theory.
Neo-liberalism comes from the subject of international relations. Fukuyama is the most representative neo-liberal. Important
is the notion of 'soft power': the spread of capitalism and western culture and other forms of globalisation spreads western notions
of democracy and human rights. It was important to integrate countries into the international capitalist (and engage them in the
multilateral) system. At the time of the fall of the Berlin Wall this seemed to be a convincing theory. It was very much adopted
as a key foreign policy strategy in the UK and the US. One of its biggest blows, however, is the lack of political reform we have
seen in China. What this showed was that democratisation does not necessarily follow capitalism and globalisation.
Just to qualify what I said above - the would not use the term "western notions". Ie they would not associate democracy or human
rights with being western. They are very cosmopolitan, and believe in the notion of universal, (not relative), values.
""ignoring the money metric means that you want someone else to pay."
... then money is not (or at least does not need to be) the constraint. It is a mechanism to facilitate the project. If we want
universal healthcare, money is not the constraint,"
Oh please, this is just two-bit nominalism: "money" then is just the mechanism by which "you want someone else to pay" and
"the constraint is the ability of society to train and sustain (feed and house) the required expertise."
That is the *physical* aggregate constraint, regardless of whoever pays, the practical constraint, given that physical stuff
is purchased with money, creating or obtaining that money.
The question is then distributional, who is going to pay the money to "train and sustain (feed and house) the required expertise".
Unless there are ample unused resources, someone will have to pay.
What right-wingers object to is the idea that "universal health care" is paid for as a percent of income, so that someone on
£100,000 a year pays £8,000 a year for exactly the same level of service that someone on £10,000 a year pays £800 a year for.
@Luis Enrique: Correct - you are not a neoliberal as you'd like to see far more social housing? A neoliberal believes in more
economic freedom, so you achieve the aim of housing people who need state help for housing, food, energy etc by giving them the
money to buy a basic level of those things. The State should not be in the business of saying this house here is not a social
housing one, but this next that gets built is.
Blissex: "Oh please, this is just two-bit nominalism: "money" then is just the mechanism by which "you want someone else to pay""
Umm, no. In real terms, the someone else who is paying in health care is mainly the health care professional treating you.
"Unless there are ample unused resources, someone will have to pay."
But in all modern capitalist countries there are ample unused resources as far as the eye can see. Medicine is one way to use
them up, nearly cost-free, and all benefit. Most people value "not being dead" highly. As Paul Samuelson said responding to stupid
worries about the cost of the US health care system, so it's 15% (or whatever). It's the best 15% of the economy.
The real problem is that "socialized medicine" is too efficient in real terms, and doesn't create corrupt and powerful satrapies
to demand public money, as the US health system does. Since the UK has the most efficient health care system, it has the least
real resource "someone has to pay" problem, but it causes the biggest demand gap, the true longterm, macro problem. The opposite
for the USA. The real right wing concern is that the underpeople get health care at all, not some smokescreen triviality about
Most written about health care, as about war, follows the backwards, mainstream way. C Adams is following the correct, MMT/Keynesian
way. If that is two-bit nominalism, we need more of it.
Until recently I haven't been closely following the controversy between Wikipedia and
popular anti-imperialist activists like John Pilger, George Galloway, Craig Murray, Neil Clark,
Media Lens, Tim Hayward and Piers Robinson.
Wikipedia has always been biased in favor of
mainstream CNN/CIA narratives, but until recently I hadn't seen much evidence that this was due to
anything other than the fact that Wikipedia is a crowdsourced project and most people believe
establishment-friendly narratives. That all changed when I
this article by Craig Murra
y, which is primarily what I'm interested in directing people's
attention to here.
The article, and
this one which
prompted it by
, are definitely worth reading in their entirety, because
their contents are jaw-dropping. In short there is an account which has been making edits to
Wikipedia entries for many nears called Philip Cross. In the last five years this account's
operator has not taken a single day off–no weekends, holidays, nothing–and according to their time
log they work extremely long hours adhering to a very strict, clockwork schedule of edits
throughout the day as an ostensibly unpaid volunteer.
This is bizarre enough, but the fact that this account is undeniably focusing with
malicious intent on anti-imperialist activists who question establishment narratives and the fact
that its behavior is being aggressively defended by Wikipedia founder Jimmy Wales means that
there's some serious fuckery afoot.
"Philip Cross", whoever or whatever that is, is absolutely head-over-heels for depraved Blairite
war whore Oliver Kamm, whom Cross mentioned as a voice of authority
in an entry about the media analysis duo known collectively as
Media Lens. Cross harbors a special hatred for British politician and broadcaster George Galloway,
who opposed the Iraq invasion as aggressively as Oliver Kamm cheered for it, and on whose Wikipedia
entry Cross has made an astonishing 1,800 edits.
Despite the overwhelming evidence of constant malicious editing, as well as outright admissions
of bias by the Twitter account linked to Philip Cross, Jimmy Wales has been extremely and
conspicuously defensive of the account's legitimacy while ignoring evidence provided to him.
"Or, just maybe, you're wrong,"
to a Twitter user inquiring about the controversy the other day. "Show me the diffs or
any evidence of any kind. The whole claim appears so far to be completely ludicrous."
totally not-triggered Wales in another response. "You are really very very far from the facts of
reality here. You might start with even one tiny shred of some kind of evidence, rather than
just making up allegations out of thin air. But you won't because trolling."
"You clearly have very very little idea how it works,"
in another response. "If your worldview is shaped by idiotic conspiracy sites, you
will have a hard time grasping reality."
As outlined in the articles by Murray and
, the evidence is there
lays out "diffs" (editing changes) in black and white
showing clear bias by the Philip Cross account, a very slanted perspective is clearly and
undeniably documented, and yet Wales denies and aggressively ridicules any suggestion that
something shady could be afoot. This likely means that Wales is in on whatever game the Philip
Cross account is playing.
Which means the entire site is likely involved in some sort of
psyop by a party which stands to benefit from keeping the dominant narrative slanted in a
A 2016 Pew Research Center report found that Wikipedia was getting some
billion page views per month
. Billion with a 'b'. Youtube
that it's going to be showing text from Wikipedia articles on videos about conspiracy
theories to help "curb fake news". Plainly the site is extremely important in the battle for
control of the narrative about what's going on in the world. Plainly its leadership fights on one
side of that battle, which happens to be the side that favors western oligarchs and intelligence
How many other "Philip Cross"-like accounts are there on Wikipedia?
Has the site always functioned an establishment psyop designed to manipulate public perception of
existing power structures, or did that start later? I don't know.
Right now all I know
is that an agenda very beneficial to the intelligence agencies, war profiteers and plutocrats of
the western empire is clearly and undeniably being advanced on the site, and its founder is telling
us it's nothing. He is lying. Watch him closely.
The Zionist side is ALWAYS the side that is
Eustace Mullins was a
truly kind individual. His only crime was to not
swallow the hogwash Koolaid of the ZioNAZI. For that
he was followed by the FBI for 30 years.
But of course all the standard tropes are
trotted out on Wikipedia. I suspect that Wiki / Wales
gets a lot of funding from YOU KNOW WHO. Same people
who has the Germans put people in jail for thought
You are only safe when you are looking at a
page regarding theoretical mathematics. But not
mathematics about global warming.
Aaaand finally: James Corbett of Corbettreport.com, a prolific documentary
filmmaker--whose docs are always top rated on topdocumentaryfilms.com, doesn't
have a wikipedia page, despite MANY people trying to create one for him. Why is
that, you ask? Because they are extremely subversive to the CIA and the
established globalist order, and therefore that fact of suppression of Corbett
suggests coordination between Wikipedia and the globalist thalassocracy of the
empire of the city
How much 'filtering' is being done, and through what channels do filtering
requests arrive? (if any)
Lots of news outlets have changed over the last few years. Formerly respected
papers have been reduced to tabloids. The Washington Post is now the Bezos Blog,
for example. Twitter is popping up 'warnings' about 'fake news'. All the radio
and TV channels run identical bullshit war stories within minutes of each other.
And Wikipedia has been going downhill for years.
So, is ZH immune to the effluvia from the ministry of truth?
Nice article, but there is a much better way of proving that Wikipedia=CIA. It's
true, everybody can edit Wikipedia, but not everyone gets to keep their edits.
Here is an experiment that everyone can carry out
you edit well or create a new informative page on something of no interest to the
FBI or CIA, say astronomy or physics, no problem, your contribution stays. But
try to provide evidence--and there is plenty--that the government was involved in
the assassinations of MLK, JFK, RFK or the demolitions of 9/11, and you'll be
"reverted" (their term) within FIVE minutes. Try to quote Russia's version of
the Crimeans' overwhelming vote to join Russia, and you'll be "reverted" lickety
split. Provide evidence that Winston Churchill--lionized by our rulers--was an
imperialist, a racist, a champion of inequality, and the contribution will
disappear while you pause your honest labors for a cup of tea! Our rulers are
masters of propaganda, and Wikipedia is just one of their brilliantly vicious
outlets--created, controlled, and edited to brainwash us!
The reason we are not given a straight answer as to why we're meant to want our institutions
fighting an information war on our behalf (instead of allowing us to sort out fact from fiction
on our own like adults) is because the answer is ugly.
we discussed last time , the only real power in this world is the ability to control the
dominant narrative about what's going on. The only reason government works the way it works,
money operates the way it operates, and authority rests where it rests is because everyone has
agreed to pretend that that's how things are. In actuality, government, money and authority are
all man-made conceptual constructs and the collective can choose to change them whenever it
wants. The only reason this hasn't happened in our deeply dysfunctional society yet is because
the plutocrats who rule us have been successful in controlling the narrative.
Whoever controls the narrative controls the world. This has always been the case. In many
societies throughout history a guy who made alliances with the biggest, baddest group of armed
thugs could take control of the narrative by killing people until the dominant narrative was
switched to "That guy is our leader now; whatever he says goes." In modern western society, the
real leaders are less obvious, and the narrative is controlled by propaganda.
Propaganda is what keeps Americans accepting things like the fake two-party system, growing
wealth inequality, medicine money being spent on bombs to be dropped on strangers in stupid
immoral wars, and a government which simultaneously creates steadily increasing secrecy
privileges for itself and steadily decreasing privacy rights for its citizenry. It's also what
keeps people accepting that a dollar is worth what it's worth, that personal property works the
way it works, that the people on Capitol Hill write the rules, and that you need to behave a
certain way around a police officer or he can legally kill you.
And therein lies the answer to the question. You are not being protected from
"disinformation" by a compassionate government who is deeply troubled to see you believing
erroneous beliefs, you are being herded back toward the official narrative by a power
establishment which understands that losing control of the narrative means losing power. It has
nothing to do with Russia, and it has nothing to do with truth. It's about power, and the
unexpected trouble that existing power structures are having dealing with the public's newfound
ability to network and share information about what is going on in the world.
Economic analysis often uses the term ceteris paribus -- all other things being equal -- but all other
things are not equal. The worker Tesla employed might have found employment elsewhere; it may have
even been more stable, safer employment that did not entail payment in Tesla equity, that is
subject to some uncertainty as to its ultimate value.
To highlight this point, it may be helpful
to consider the economic activity generated by Tesla's competitors in California. These
competitors' operations are being impaired by Tesla's sale of deeply subsidized cars in the state.
While Tesla's competitors do not manufacture cars in the state, they account for
employing 140,596 jobs (that pay cash),
accounting for $8.56 billion in wages,
paying $9.38 billion in taxes, and
making $50 million of charitable contributions per year.
On a more minor point, the IHS Markit report assumes that the $2.1 billion in "wages" paid to
Tesla workers is spent in the California economy. As discussed above, the report includes in these
"wages" Tesla equity granted to employees without quantifying what percentage of wages this equity
represented. We are skeptical as to how many employees spent their Tesla stock to boost local
Thanks to Friday's carefully crafted deep-state disclosures by WaPo and the Times , along
with actual reporting by the Daily Caller 's Chuck
Ross, we now know it wasn't a mole at all - but 73-year-old University of Cambridge professor
Stefan Halper, a US citizen, political veteran and longtime US Intelligence asset enlisted by
the FBI to befriend and spy on three members of the Trump campaign during the 2016 US election
I think Rudy's flipped seeking redemption for his role in 911.
The deep state is not going down quietly or without a fight and they are in full attack
mode. Multiple questionable instances yesterday to change news cycle, plus a week worths of
leaks by major media mouthpieces justifying their crimes.
What's great is they are so caught up in their nest of lies, each new lie just contradicts
previous ones and exposes more of the truth.
Now the question is: How do you bring these people to justice without starting a violent
backlash / Civil War?
The cognitive dissonance is very strong on the left and they've fallen victim to hive
mentality, simply regurgitating talking points they hear through pop culture and media. We
are so afraid of not fitting in (as a society) that we will willingly accept completely
contradicting "facts", defend them, and deride those who disagree. Further, there is no room
for disagreement, for they are the party of tolerance, and if you disagree with them, you are
intolerant, which cannot be tolerated in an open and free society (see how that works?).
The real hope is people are able to break the spell and think for themselves again. But I
worry it's too late. A generation of children assaulted with excessive vaccination are now
adults and it shows...
People in the USA better get a grip real fast and realize that it's not Russia, China or
Iran that is the real enemy of Americans, it's the British . . . the money gnomes in London
and the "Queens men". They've caused more problems for the USA in the last 100+ years than
the other three combined many times over.
Let's see. Money was exchanged, foreign govt agents and contractors hired. The FBI knew
about Hillary's criminal enterprises and illegal dissemination of classified documents and
apparently has been complicit in helping or protecting her. The NYT and WaPo along with the
network media regurgitated much of the anti-Trump rhetoric together in sync with the tsunami
of fake news, either in creating it or knowingly participating in it. No wonder the news
media in a sudden shift have been trying to paint themselves as now being on the other side
of this Russkie Fubar after they promoted it 24/7 for two years without let-up. What's the
penalty for trying to overthrow the President of the United States? Lots of folks here are
sitting on potential indictments for treason. Enough talk. With all they got from the
Congressional hearings, and now this, it's time!!!... for Trump to start draining.
Lemmings get what they deserve.
Almost always as the iron law of oligarchy implies. Period of
revolution and social upheaval are probably the only exceptions.
In 2018 there is no doubt that Trump is an agent of Deep State, and
probably the most militant part of neocons. What he the
agent from the beginning or not is not so important. He managed to
fool electorate with false promises like Obama before him and get
Ask yourself why Sessions ordered Rosenstein to resign and Trump
declined his resignation? Likely because Sessions was recused from
Russia investigation and could not be told Rosenstein was working for
Trump from day 1.
(Mueller also met with Trump the day before Rosenstein appointed him
Also relevant, Rosenstein is Republican and in 2007/8 was blocked
from getting a seat on appeals court by Dems. Doesn't seem he would be
loyal to the Obama crowd and trying to take down Trump with a phony
believe it. What's happened to the NYC detectives who viewed
the "insurance policy" on Weiner's laptop? The kiddie stuff is
the real hot potato here. The power "elite" are pure
Yes....when you start to add up various facts coming from this
investigation it is easy to argue that the prime beneficiary has
been Trump. Why would Trump even consider firing this guy? The
more Mueller digs the more crap surfaces about the Dems, and they
are in full support of it without any seeming awareness of the
results. They are so blinded by their hatred they cannot see
The info from Weiner's computer is really going to make for
major popcorn sales. All Hitlery's "lost" emails are in there. All
the names in his address book will also make for some interesting
reading. Just a guess but there are a lot of very nervous NYC
elected officials and pedos making sure their passports are up to
date. The Lolita Express to Gitmo....
You guys see everything through Trump colored glasses. Trump is dirty and just
because the evidence hasn't been shown to you doesn't mean it isn't there.
Mueller has the dirt on Trump. It will show. Does everyone here forget that
Watergate took 2 1/2 years to play out?
Being in the business he is in, there is little doubt that Trump has paid
out millions of dollars over the years in bribes and payoffs to greedy
politicians, regulators, and zoning commissioners given to filthy lucre in
return for building permits, zoning variances, and law changes.
I know he
is but what are they? This could be one reason the politicians, regulators,
and zoning commissioners hate him so much. He knows what they know.
Trump is no dirtier than other politicians and much less than some.
He is just dirty in a way (he was usually the payer, they were the payees)
that bothers the other ones.
Obama has a history of taking out his opponents in their personal life, so
that he doesnt have to meet them in the political arena, just look at his
state campaigns, and then his senate campaign. Look at how he used the
bureaucracy during his admin to preempt opposition, not allowing opposition
groups to get tax exempt status and sending osha/fbi/treasury etc to harrass
people that were more than marginally effective.
With that context set I would like to know the following.
1. Did the brennan/comey/clapper cabal have investigations running on all
the gop primary front runners?
2. Did they promote Trump to win the GOP primary, to eliminate those
rivals from consideration, just to attempt to destroy him in the general with
the russian collusion narrative and his own words.
3. Was Comey's failure to ensure Hillary's victory due to incompetence or
arrogance? I say arrogance, because his little late day announcement of the
new emails was obviously ass covering so that he could pass whatever senate
hearing that would be required for his new post in the hillary administration.
The illegitimate liberal MSM is sucking all the oxygen out of the room for
legitimate criticism of Trump. This Russian Collusion stormy daniels stuff is
a bunch of bologna, and it's making a smokescreen for Trump to carry out his
Hegelian dialectic, Divide and conquer, kabuki
For the most part I like Peter Schiff. I don't think he talks
enough about the criminal manipulation of commodities by the
banksters and the seemingly endless reluctance by our glorious
leaders to prosecute them.
On this topic: The lawlessness of
the 17 agencies is beyond the pale. They have set themselves
apart and for this they will have to pay eventually. I have no
doubt that in the minds of the Bureau principals there was motive
and there was opportunity. I don't believe anything that comes
out of their mouths. Robert Mueller is a three letter word for a
donkey. He is a criminal and a totally owned puppet of the deep
and dark state. Last I heard, the FBI planted a mole in the Trump
campaign. Iff true, that speaks volumes...
"although I am disappointed in some of his failings."...
Yeah I know
just what ya mean...
The treason of war crimes he's committed exceeding all of his
predecessor(s) in his short assed existence as President and threatening
war on two nuclear superpowers that could easily wipe his office and 4
thousand square miles of CONUS "
off the map
Endorsing a torturer murder to head the CIA condoning her efforts in
public "thumbing his nose" at Article 3 Geneva the U.S. Constitution and
for his military to tacitly continue disobeying the UCMJ as a response
to that "selection"!...
Telling the parasitic partner that owns him through blackmail that
Jerusalem is the Capital of IsraHell as over 200 Palestinians are
murdered and 3 thousand others injured in joyous celebration of that
violation of international law which is the equivalent of pouring
"gasoline" on a building that has already been reduced to "ash"...
They didn't really think things through when they plotted against Trump and
figured Hillary would win and they could sweep this under the rug and then she
lost. Funnier is that many expected her to lose as she never won an election
in her life despite her being "The Most Qualified" candidate as her parrots in
the media lovingly called her. Now Trump and his team will stomp them all into
the ground. My guess is that he'll pinch others in her gang who have big egos
so that they'll talk and drop a dime which they will. The libtards are turning
on themselves in every area now. Look at Hollywood and the sexual harassment
cases in the pipeline.
It's just so pleasurable watching your enemy fall on their sword while you
sit back and enjoy life and smile....
Was the Trump campaign "Set-up"? It's just another way the oligarchy
is deflecting what the real problem is. Americans are fed up with the
political status quo in this country, and wanted a change. Neither political
party offers any change for the better. It is also why Bernie Sanders had a
huge following, but no one is calling his campaign a "set-up", and he would
have been the more likely choice the Russians would have helped.
It really doesn't make any sense why the Russians would have selected
Trump, but it makes a lot of sense why the oligarchy would want to discredit
Trump any means availble to them. And since they have always hated Russia so
much, that is the big tip-off of who comes up with these stupid stories about
Russians meddling in our elections.
there needs to be a schedule drawn up of charges against individuals. it's
all very well talking and talking anf talking around the water cooler, but
until the charges are drawn up and a grand jury empowered, it is all
pissing into the wind.
the individuals range from obama through clinton,
through the loathsome slimebags in the alphabet soup, through foundations,
through DNC leaders/politicians, through Weiner, Abedin, Rice and the
witches cabal (Wasserstein Schulz etc), UK intel agencies, awan brothers,
pakistan intel supplying Iran with classified documents and so on.
there are charges (of treason, sedition, wilful mishandling of classifed
documents, bribery, corruption, murder, child trafficking, election
rigging, spying for/collusion with foreign powers, funding terrorism, child
abuse, election rigging/tampering, misappropriation of federal funds, theft
etc as well as general malfeasance, failure to perform duties and so on)
that are not being brought that are so obvious, only a snowflake would miss
what charges can be brought against the MSM for propaganda,
misdirection, lying, fabrication and attempting to ovetthrow a legitimately
elected president using these techniques to further their own ends? there
is no freedom of the press to lie and further civil unrest.
a list of charges against individuals in the DNC/alphabet soup is what
is needed. if the DoJ is so incompetent or corrupt that it is unable to do
its job, private law suits need to be brought to get all the facts out in
someone needs to write the book and make it butt hole shaped to shove up
all those that try to make a living out of making up gossip in the NYT,
WaPo, CNN, BBC, Economist, Madcow, SNL, Oliver and so on.
these people are guilty of being assholes and need their assholes
(mouths) plugged with a very think fifteen inch book.
I hope someone writes a book on this with all of the timing and all of the
"little" things that happened on the way to the coronation of Hillary.
Comey "interviews" Hillary on 4th of July weekend. Wraps up case by 9am
Tuesday after 4th of July. By noon, Hillary and Obama are on Air Force 1
to begin campaign. Within a few weeks Seth Rich is dead and DWS avoids
being "killed in an armed robbery gone bad" when she steps down as head of
DNC. Above article forgets to mention that GPS also hired the wife of
someone in the government as part of the "fact gathering" team.
"... On July 27, 2017 the House Judiciary Committee called on the DOJ to appoint a Special Counsel, detailing their concerns in 14 questions pertaining to "actions taken by previously public figures like Attorney General Loretta Lynch, FBI Director James Comey, and former Secretary of State Hillary Clinton." ..."
"... On September 26, 2017 , The House Judiciary Committee repeated their call to the DOJ for a special counsel, pointing out that former FBI Director James Comey lied to Congress when he said that he decided not to recommend criminal charges against Hillary Clinton until after she was interviewed, when in fact Comey had drafted her exoneration before said interview. ..."
"... And now, the OIG report can tie all of this together - as it will solidify requests by Congressional committees, while also satisfying a legal requirement for the Department of Justice to impartially appoint a Special Counsel. ..."
"... Who cares how many task forces, special prosecutors, grand juries, commissions, or other crap they throw at this black hole of corruption? We all know the score. The best we can hope for is that the liberals and neo-cons are embarrassed enough to crawl under a rock for awhile, and it slows down implementation of their Orwellian agenda for a few years. ..."
As we reported on
Thursday , a long-awaited report by the Department of Justice's internal watchdog into the Hillary Clinton email investigation
has moved into its final phase, as the DOJ notified multiple subjects mentioned in the document that they can privately review it
by week's end, and will have a "few days" to craft any response to criticism contained within the report, according to the
Wall Street Journal .
Those invited to review the report were told they would have to sign nondisclosure agreements in order to read it , people
familiar with the matter said. They are expected to have a few days to craft a response to any criticism in the report, which
will then be incorporated in the final version to be released in coming weeks . -
Now, journalist Paul Sperry reports that " IG Horowitz has found "reasonable grounds" for believing there has been a violation
of federal criminal law in the FBI/DOJ's handling of the Clinton investigation/s and has referred his findings of potential criminal
misconduct to Huber for possible criminal prosecution ."
Who is Huber?
in March , Attorney General Jeff Sessions appointed John Huber - Utah's top federal prosecutor, to be paired with IG Horowitz
to investigate the multitude of accusations of FBI misconduct surrounding the 2016 U.S. presidential election. The announcement came
one day after Inspector General Michael Horowitz confirmed that he will also be investigating allegations of FBI FISA abuse .
While Huber's appointment fell short of the second special counsel demanded by Congressional investigators and concerned citizens
alike, his appointment and subsequent pairing with Horowitz is notable - as many have pointed out that the Inspector General is significantly
limited in his abilities to investigate. Rep. Bob Goodlatte (R-VA) noted in March " the IG's office does not have authority to compel
witness interviews, including from past employees, so its investigation will be limited in scope in comparison to a Special Counsel
Sessions' pairing of Horowitz with Huber keeps the investigation under the DOJ's roof and out of the hands of an independent investigator
Who is Horowitz?
In January, we profiled Michael Horowitz based on thorough research assembled by independent investigators. For those who think
the upcoming OIG report is just going to be "all part of the show" - take pause; there's a good chance this is an actual happening,
so you may want to read up on the man whose year-long investigation may lead to criminal charges against those involved.
Horowitz was appointed head of the Office of the Inspector General (OIG) in April, 2012 - after the Obama administration hobbled
the OIG's investigative powers in 2011 during the "Fast and Furious" scandal. The changes forced the various Inspectors General for
all government agencies to request information while conducting investigations, as opposed to the authority to demand it. This allowed
Holder (and other agency heads) to bog down OIG requests in bureaucratic red tape, and in some cases, deny them outright.
What did Horowitz do? As one twitter commentators puts it,
he went to war ...
In March of 2015, Horowitz's office
a report for Congress titled Open and Unimplemented IG Recommendations . It laid the Obama Admin bare before Congress - illustrating
among other things how the administration was wasting tens-of-billions of dollars by ignoring the recommendations made by the OIG.
After several attempts by congress to restore the OIG's investigative powers, Rep. Jason Chaffetz successfully introduced H.R.6450
- the Inspector General Empowerment Act of 2016 - signed by a defeated lame duck President Obama into law on
December 16th, 2016 , cementing an alliance between Horrowitz and both houses of Congress .
1) Due to the Inspector General Empowerment Act of 2016, the OIG has access to all of the information that the target agency
possesses. This not only includes their internal documentation and data, but also that which the agency externally collected and
See here for a complete overview of the
OIG's new and restored powers. And while the public won't get to see classified details of the OIG report, Mr. Horowitz is also big
on public disclosure:
Horowitz's efforts to roll back Eric Holder's restrictions on the OIG sealed the working relationship between Congress and the
Inspector General's ofice, and they most certainly appear to be on the same page. Moreover, FBI Director Christopher Wray seems to
be on the same page
Which brings us back to the OIG report
expected by Congress a week from Monday.
On January 12 of last year, Inspector Horowitz announced an OIG investigation based on " requests from numerous Chairmen and Ranking
Members of Congressional oversight committees, various organizations (such as Judicial Watch?), and members of the public ."
The initial focus ranged from the FBI's handling of the Clinton email investigation, to whether or not Deputy FBI Director Andrew
McCabe should have been recused from the investigation (ostensibly over
$700,000 his wife's campaign took from Clinton crony Terry McAuliffe around the time of the email investigation), to potential
collusion with the Clinton campaign and the timing of various FOIA releases. Which brings us back to the
OIG report expected by Congress a week from
On July 27, 2017 the House Judiciary Committee called on the DOJ to appoint a Special Counsel, detailing their concerns in
14 questions pertaining to "actions taken by previously public figures like Attorney General Loretta Lynch, FBI Director James Comey,
and former Secretary of State Hillary Clinton."
The questions range from Loretta Lynch directing Mr. Comey to mislead the American people on the nature of the Clinton investigation,
Secretary Clinton's mishandling of classified information and the (mis)handling of her email investigation by the FBI, the DOJ's
failure to empanel a grand jury to investigate Clinton, and questions about the Clinton Foundation, Uranium One, and whether the
FBI relied on the "Trump-Russia" dossier created by Fusion GPS.
On September 26, 2017 , The House Judiciary Committee repeated their call to the DOJ for a special counsel, pointing out that
former FBI Director James Comey lied to Congress when he said that he decided not to recommend criminal charges against Hillary Clinton
until after she was interviewed, when in fact Comey had drafted her exoneration before said interview.
And now, the OIG report can tie all of this together - as it will solidify requests by Congressional committees, while also
satisfying a legal requirement for the Department of Justice to impartially appoint a Special Counsel.
As illustrated below by TrumpSoldier , the report will go from the Office of the Inspector General to both investigative committees
of Congress, along with Attorney General Jeff Sessions, and is expected within weeks .
Once congress has reviewed the OIG report, the House and Senate Judiciary Committees will use it to supplement their investigations
, which will result in hearings with the end goal of requesting or demanding a Special Counsel investigation. The DOJ can appoint
a Special Counsel at any point, or wait for Congress to demand one. If a request for a Special Counsel is ignored, Congress can pass
legislation to force an the appointment.
And while the DOJ could act on the OIG report and investigate / prosecute themselves without a Special Counsel, it is highly unlikely
that Congress would stand for that given the subjects of the investigation.
After the report's completion, the DOJ will weigh in on it. Their comments are key. As TrumpSoldier points out in his analysis,
the DOJ can take various actions regarding " Policy, personnel, procedures, and re-opening of investigations. In short, just about
everything (Immunity agreements can also be rescinded). "
Meanwhile, recent events appear to correspond with bullet points in both the original OIG investigation letter and the 7/27/2017
letter forwarded to the Inspector General:
... ... ...
With the wheels set in motion last week seemingly align with Congressional requests and the OIG mandate, and the upcoming OIG
report likely to serve as a foundational opinion, the DOJ will finally be empowered to move forward with an impartially appointed
"To save his presidency, Trump must expose a host of criminally cunning Deep State political operatives as enemies to the Constitution,
including John Brennan, Eric Holder, Loretta Lynch, James Comey and Robert Mueller - as well as Barack Obama and Hillary Clinton."
Killing the Deep State , Dr Jerome Corsi, PhD., p xi
I've been more than upfront about my philosophy. I have said on more than one occasion that progs will rue the day they drove
a New Yorker like Trump even further to the right.
Now you see it in his actions from the judiciary to bureaucracy destruction to (pick any) and...as I often cite... some old
dead white guy once said ..."First they came for the ___ and I did not speak out. Then they came for..."
Now I advocate for progs to swim in their own deadly juices, without a moment's hesitation on my part, without any furtive
look back, without remorse or any compassion whatsover.
Forward! ...I think is what they said, welcome to the Death Star ;-)
There have been (and are) plenty on "our side"...Boehner, Cantor, McCain, Romney and the thinly disguised "social democrat"
Bill Kristol just to name several off the top of my head but the thing is, they always have to hide what they really are from
us until rooted out.
That's what I try to point out to "our friends" on the left all the time, for example, there was never any doubt that Chris
Dodd, Bwaney Fwank and Chuck Schumer were (and are) in Wall Streets back pocket. But for any prog to openly admit that is to sign
some sort of personal death warrant, to be ostracized, blacklisted and harassed out of "the liberal community" so, they bite their
tongue & say nothing...knowing what the truth really is.
Hell, they even named a "financial reform bill" after Dodd & Frank...LMAO!!!
It's just the dripping hypocrisy that gets me.
For another example, they knew what was going on with Weinstein, Lauer, Spacey, Rose etal but as long as the cash flowed and
they towed-the-prog-BS-line outwardly, they gladly looked the other way and in the end...The Oprah...gives a speech in front of
them (as they bark & clap like trained seals) about...Jim Crow?
Jim Crow?!...lol...one has nothing to do with the other Oprah! The perps & enablers are sitting right there in front of you!
"After the report's completion, the DOJ will weigh in on it. Their comments are key. As TrumpSoldier points out in his analysis,
the DOJ can take various actions regarding " Policy, personnel, procedures, and re-opening of investigations. In short, just about
everything (Immunity agreements can also be rescinded). "
Rescind Immunity, absolutely damn right, put them ALL under oath and on the stand! This is huge! Indeed this goes all the way
to the top, would like to see Obama and the 'career criminal' testify under oath explaining how their tribe conspired to frame
Trump and the American people.
Hell, put them on trial in a military court for Treason, what's the punishment for Treason these days???
Also would like to see Kerry get fried under the 'Logan Act'!
As are half of their fellow travelers in the GOP. Neocon liars. Talk small constitutional govt then vote for war. Those two
are direct opposites, war and small govt. The liars must be exposed and removed. The Never Trumpers have outed themselves but
many are hiding in plain sight proclaiming they support the President. It appears they have manipulated Trump into an aggressive
stance against Russia with their anti Russia hysteria. Time will tell. The bank and armament industries must be removed from any
kind of influence within our govt. Most of these are run by big govt collectivists aka communists/globalists.
Who cares how many task forces, special prosecutors, grand juries, commissions, or other crap they throw at this black
hole of corruption? We all know the score. The best we can hope for is that the liberals and neo-cons are embarrassed enough to
crawl under a rock for awhile, and it slows down implementation of their Orwellian agenda for a few years.
Geologist Arthur Berman, who has been skeptical about the shale boom,
warned on Thursday that the Permian's best years are gone and that the most productive U.S.
shale play has just seven years of proven oil reserves left.
"The best years are behind us," Bloomberg quoted Berman as saying at the Texas Energy
Council's annual gathering in Dallas.
The Eagle Ford is not looking good, either, according to Berman, who is now working as an
industry consultant, and whose pessimistic outlook is based on analyses of data about reserves
and production from more than a dozen prominent U.S. shale companies.
"The growth is done," he said at the gathering.
Those who think that the U.S. shale production could add significant crude oil supply to the
global market are in for a disappointment, according to Berman.
"The reserves are respectable but they ain't great and ain't going to save the world,"
Bloomberg quoted Berman as saying.
Yet, Berman has not sold the EOG Resources stock that he has inherited from his father
"because they're a pretty good company."
The short-term drilling productivity outlook by the EIA estimates that the Permian's oil
production hit 3.110 million bpd in April, and will rise by 73,000 bpd to 3.183
million bpd in May.
Earlier this week, the EIA raised its forecast for total U.S. production
this year and next. In the latest Short-Term Energy Outlook (STEO), the EIA said that it
expects U.S. crude oil production to average 10.7 million bpd in 2018, up from 9.4 million bpd
in 2017, and to average 11.9 million bpd in 2019, which is 400,000 bpd higher than forecast in
the April STEO. In the current outlook, the EIA forecasts U.S. crude oil production will end
2019 at more than 12 million bpd.
Yet, production is starting to outpace takeaway capacity in the Permian, creating
bottlenecks that could slow down the growth pace.
Drillers may soon start to test the Permian region's geological limits, Wood Mackenzie has
warned. And if E&P companies can't overcome the geological constraints with tech
breakthroughs, WoodMac has warned that Permian production could
peak in 2021 , putting more than 1.5 million bpd of future production in question, and
potentially significantly influencing oil prices.
The takeaway bottlenecks have hit WTI crude oil priced in Midland, Texas, which declined
sharply compared with Brent in April, the EIA said in the May STEO.
" As production grows beyond the capacity of existing pipeline infrastructure, producers
must use more expensive forms of transportation, including rail and trucks. As a result, WTI
Midland price spreads widened to the largest discount to Brent since 2014. The WTI Midland
differential to Brent settled at -$17.69/b on May 3, which represents a widening of $9.76/b
since April 2," the EIA said.
Hookers : Special Counsel urgently needs your stories. We pay top dollar. Big tits, role-play,
and lying required. Television experience preferred. No drug screening. No background check.
Call 1-800-George-Soros or contact the Law Offices of Wray, Mueller, and Rosenstein,
"... Internet censorship is getting pretty bad, so best way to keep seeing my daily articles is to get on the mailing list for my website , so you'll get an email notification for everything I publish. My articles and podcasts are entirely reader and listener-funded, so if you enjoyed this piece please consider sharing it around, liking me on Facebook , following my antics on Twitter , checking out my podcast , throwing some money into my hat on Patreon or Paypal , or buying my new book Woke: A Field Guide for Utopia Preppers . ..."
"... People are not turning to the MSM, they are heading straight to: MoA, ZH, PCR, RT... this is where people now turn to find the truth! The two most frequent, each appearing in six out of seven datasets? ZeroHedge and RT. ..."
"... I have never been a Trump supporter, but IMO the one positive I saw back in the elections is that his character would bring about exactly this loss of trust. Not "He's bad and we can't trust him," so much as the fact that he's polarizing, and will fight everyone, and has inadvertently caused a lot of bad people to expose themselves. ..."
I sometimes try to get
establishment loyalists to explain to me exactly why we're all meant to be terrified of this
"Russian propaganda" thing they keep carrying on about. What is the threat, specifically?
That it makes the public less willing to go to war with Russia and its allies? That it makes us
less trusting of lying, torturing, coup-staging intelligence agencies? Does accidentally catching a
glimpse of that green RT logo turn you to stone like Medusa, or melt your face like in
of the Lost Ark
"Well, it makes us lose trust in our institutions,"
is the most common
Okay. So? Where's the threat there?
We know for a fact that we've been lied to
by those institutions. Iraq isn't just something we imagined
. We should be skeptical of
claims made by western governments, intelligence agencies and mass media. How specifically is that
When you try to get down to the brass tacks of the actual argument being made and demand
specific details about the specific threats we're meant to be worried about, there aren't any to be
found. Nobody's been able to tell me what specifically is so dangerous about westerners being
exposed to the Russian side of international debates, or of Russians giving a platform to one
of an American domestic debate. Even if every single one of the allegations about
Russian bots and disinformation are true (
), where is the actual clear and present danger? No one can say.
What if Russia suddenly announced that its Baltic Fleet had dispatched an armada towards
Britain? Would most people greet the news with steely resolve in the knowledge that their
governments would know what to do, or would constant Kremlin-influenced reports about the
incompetence of British institutions make them conclude that any resistance was pointless?
I mean, wow. Wow! Just wow. Where to even begin with this?
Back to the aforementioned excerpt. Braw claims that if Russian propaganda isn't shut down or
counteracted, Russia could send a fleet of war ships to attack Britain, and the British people
would react unenthusiastically? Wouldn't cheer loudly enough as the British Navy fought the
Russians? Would have a defeatist emotional demeanor? What exactly is the argument here?
That's seriously her only attempt to directly address the question of where the actual
danger is. Even in the most cartoonishly dramatic hypothetical scenario this Atlantic Council
member can possibly imagine, there's
no tangible threat of any kind.
if Russia was directly attacking the United Kingdom at home, and Russian propaganda had somehow
magically dominated all British airwaves and been believed by the entire country, that still
wouldn't have any impact on the British military's ability to fight a naval battle. There's
literally no extent to which you can inflate this "Russian propaganda" hysteria to turn it into a
possible threat to actual people in real life.
Such responses to disinformation are like swatting flies: time-consuming and ineffective. But
not addressing disinformation is ineffective, too. "Western media still have this thing where
they try to be completely balanced, so they'll say, 'the Russians say this, but on the other
hand the Americans say this is not true,' They end up giving a lie and the truth the same
value," noted Toomas Hendrik Ilves, the former president of Estonia.
I just have so many questions. Like, how desperate does a writer have to be for an
expert who can lend credibility to their argument that they have to reach all the way over to a
former president of Estonia?
And on what planet are these people living where Russian
narratives are given the same weight as western narratives by western mainstream media? How can I
get to this fantastical parallel dimension where western media "try to be completely balanced" and
give equal coverage to all perspectives?
Braw argues that,
because Russian propaganda is so dangerous (what with the
threat of British people having insufficient emotional exuberance during a possible naval battle
and all), what is required is a "NATO of infowar", an alliance of western state media that is
tasked with combatting Russian counter-narratives.
Because, in the strange
fantasy fairy world in which Braw penned her article, this isn't already happening.
And of course, here in the real world, it
already happening. As
, mainstream media outlets have been going out of their minds churning out attack
editorials on anyone who questions the establishment narrative about what happened in Douma. A BBC
admonished a retired British naval officer
for voicing skepticism of what we're being told
about Syria on the grounds that it might "muddy the waters" of the "information war" that is being
fought against Russia. All day, every day, western mass media are pummeling the public with stories
about how awful and scary Russians are and how everything they say is a lie.
This is because western mass media outlets are owned by western plutocrats, and those
plutocrats have built their empires upon a status quo that they have a vested interest in
often to the point where they will
alliances with defense and intelligence agencies
to do so. They hire executives and editors who
subscribe to a pro-establishment worldview, who in turn hire journalists who subscribe to a
pro-establishment worldview, and in that way they ensure that all plutocrat-owned media outlets are
advancing pro-plutocrat agendas.
The western empire is ruled by a loose transnational alliance of plutocrats and
secretive government agencies. That loose alliance is your real government, and that government has
the largest state media network in the history of civilization. The mass media propaganda machine
of the western empire makes RT look like your grandmother's Facebook wall.
In that way, we are being propagandized constantly by the people who really rule us. All this
panic about Russian propaganda doesn't exist because our dear leaders have a problem with
propaganda, it exists because they believe only
should be allowed to propagandize us.
And, unlike Russian propaganda, western establishment propaganda actually
direct threat to us. By using mass media to manipulate the ways we think and vote, our true rulers
can persuade us to consent to
austerity measures and political impotence
while the oligarchs grow richer and medicine money
is spent on bombs. When we should all be revolting against an oppressive Orwellian oligarchy, we
are instead lulled to sleep by those same oligarchs and their hired talking heads lying to us about
freedom and democracy.
Russian propaganda is not dangerous. Having access to other ways of looking at
global geopolitics is not dangerous. What absolutely is dangerous is a vast empire concerning
itself with the information and ideas that its citizenry have access to.
rapey, manipulative fingers out of our minds, please.
If our dear leaders are so worried about our losing faith in our institutions, they
shouldn't be concerning themselves with manipulating us into trusting them, they should be making
those institutions more trustworthy.
Don't manipulate better,
better. The fact that an influential think
tank is now openly advocating the former over the latter should concern us all.
* * *
Internet censorship is getting pretty bad, so best way to keep seeing my daily articles is
to get on the mailing list for my
so you'll get an email notification for everything I publish. My articles and podcasts are entirely
reader and listener-funded, so if you enjoyed this piece please consider sharing it around, liking
following my antics on
, throwing some
money into my hat on
buying my new book
A Field Guide for Utopia Preppers
People are not turning to the MSM, they are heading straight to: MoA, ZH, PCR, RT... this is where people now turn to find
the truth! The two most frequent, each appearing in six out of seven datasets? ZeroHedge and RT.
"Well, it makes us lose trust in our institutions," is the most
I have never been a Trump supporter, but IMO the
one positive I saw back in the elections is that his character would
bring about exactly this loss of trust. Not "He's bad and we can't trust
him," so much as the fact that he's polarizing, and will fight everyone,
and has inadvertently caused a lot of bad people to expose themselves.
Why should you trust people who think they have the right to take
whatever amount of your money they want, use it for any purpose they
want, and also who believe they have the right to harass, torture,
stalk, or kill whoever they want, on any pretext they feel like thinking
The Atlantic Council is just another tentacle of the Soros Squid. The man should
have been dealt with as a Nazi collaborator in the aftermath of World War 2.
Unfortunately for humanity, he evaded accountability for his crimes against
humanity during the war.
Like most motions to dismiss, Paul Manafort's was initially viewed as a long-shot bid to win
the political operative his freedom and get out from under the thumb of Special Counsel Robert
But after today's hearing on a motion to dismiss filed by Manafort's lawyers, it's looking
increasingly likely that Manafort could escape his charges - and be free of his ankle bracelets
- because in a surprising rebuke of Mueller's "overreach", Eastern District of Virginia Judge
T.S. Ellis, a Reagan appointee, said Mueller shouldn't have "unfettered power" to prosecute
over charges that have nothing to do with collusion between the Trump campaign and the
Ellis said he's concerned Mueller is only pursuing charges against Manafort (and presumably
other individuals) to pressure them into turning on Trump. The Judge added that the charges
brought against Manafort didn't appear to stem from Mueller's collusion probe. Instead, they
appeared to be the work of an older investigation into Manafort that was eventually
"I don't see how this indictment has anything to do with anything the special prosecutor is
authorized to investigate," Ellis said at a hearing in federal court in Alexandria, Virginia,
concerning a motion by Manafort to dismiss the case.
It got better: Ellis also slammed prosecutors saying it appeared they were using the
indictment of Manafort to pressure him to cooperate against Trump. Manafort, 69, has pleaded
not guilty and disputes Mueller's assertion that he violated U.S. laws when he worked for a
decade as a political consultant for pro-Russian groups in Ukraine.
"You don't really care about Mr. Manafort's bank fraud," Ellis said. "You really care about
what information he might give you about Mr. Trump and what might lead to his impeachment or
According to Bloomberg, Ellis is overseeing one of two indictments against Manafort.
Manafort is also charged in Washington with money laundering and failing to register as a
foreign agent of Ukraine.
* * *
Manafort's lawyers had asked the judge in the Virginia case to dismiss an indictment filed
against him in what was their third effort to beat back criminal charges by attacking Mueller's
authority. The judge also questioned why Manafort's case there could not be handled by the U.S.
attorney's office in Virginia, rather than the special counsel's office, as it is not
Russia-related . A question many others have asked, as well.
Ellis has given prosecutors two weeks to show what evidence they have that Manafort was
complicit in colluding with the Russians. If they can't come up with any, he may, presumably,
dismiss the case. Ellis also asked the special counsel's office to share privately with him a
copy of Deputy Attorney General Rod Rosentein's August 2017 memo elaborating on the scope of
Mueller's Russia probe. He said the current version he has been heavily redacted.
At that point, should nothing change materially, Manafort may be a free man; needless to
say, a dismissal would set precedent and be nothing short of groundbreaking by potentially
making it much harder for Mueller to turn other witnesses against the president.
MSNBC host Chris Matthews recently declared,
"James Comey made his bones by standing up against torture. He was a made man before Trump came along."
Washington Post columnist Fareed Zakaria , in a column declaring that Americans should be "deeply grateful" to lawyers like Comey,
declared, "The Bush administration wanted to claim that its 'enhanced interrogation techniques' were lawful. Comey believed they
were not... So Comey pushed back as much as he could."
Martin Luther risked death to fight against what he considered the heresies of his time. Comey, a top Bush administration policymaker,
found a safer way to oppose the worldwide secret U.S. torture regime widely considered a heresy against American values. Comey
approved brutal practices and then wrote some memos and emails fretting about the optics.
Fl*ck Comey. OMG. I've been wanting to puke into a wastebasket over all of Comey's crap lately. Actually, wanting to puke is
one of my best bullshit barometers. He's a lying sack of shit, strutting his sanctimonious arrogance all over the tee-vee. Meanwhile
back home his family of women wear pink hats to protest Trump. Wonder if James the Great told his family members he approved torture?