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The Secular Stagnation as an Immanent Feature of Post-2008 Neoliberalism

Image courtesy of Koren Shadmi (What’s Behind a Rise in Ethnic Nationalism? Maybe the Economy - The New York Times, Oct 14, 2016)
News Neoliberalism as a New Form of Corporatism Recommended Links GDP as a false measure of a country economic output Ethno-linguistic and "Cultural" Nationalism as antidote to Neoliberalism Chronic Unemployment Redistribution of wealth up as the essence of neoliberalism
Forthcoming slow motion collapse of global neoliberal empire led by the USA Anti-globalization movement Why Peak Oil Threatens the International Monetary System Brexit as the start of the reversal of neoliberal globalization Immigration, wage depression and free movement of workers Economics of Peak Energy Upward Redistribution of Wealth
Identity politics as diversion of attention from social inequality Neoliberalism war on labor The Great Transformation Eroding Western living standards Immigration, wage depression and free movement of workers Greece debt enslavement Ukraine debt enslavement
Neoliberal rationality Neoliberal "New Class" as variant of Soviet Nomenklatura The fiasco of suburbia Quite coup Casino Capitalism Lawrence Summers Oil glut fallacy
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Russia oil production Helicopter Ben: Arsonist Turned into Firefighter Financial Quotes Casino Capitalism Dictionary Financial Humor Humor Etc

Introduction

Secular stagnation is a term proposed by Keynesian economist Alvin Hansen back in the 1930s to explain the USA dismal economic performance during this period. The period in which sluggish growth and output, and employment levels well below potential, coincide with a problematically low (even negative) real interest rates even in the face of the extraordinarily easy monetary policy. Later a similar phenomenon occurred in Japan. that's why it is often called called Japanification of the economy.  Secular stagnation returned to the USA in full force after the financial crisis of 2008 (so called The Long Recession), so this is the second time the USA society experience the same socio-economic phenomenon. 

Formally it can be defined as any stagnation that lasts substantially longer then the business cycle (and dominates the business cycle induced variations of economic activities), the suppression of economic performance for a long (aka secular) period. It also can be viewed as the crisis of demand, when demand became systemically weak (which under neoliberalism is ensured by redistribution of wealth up).

The global stagnation we are experiencing is the logical result of the dominance of neoliberalism and a sign of its crisis an a ideology. It is somewhat similar to the crisis of Bolshevik's ideology in the USSR in 60th when everybody realized that the existing society cannot fulfill the key promise of higher living standards. And that over centralization of economic life naturally leads to stagnation.  The analogy does not ends here, but this point is the most important.

Neoliberalism replaced over-centralization (with iron fist one party rule) with over-financialization (with iron fist rule of financial oligarchy), with generally the same result as for the economy ( In other words neoliberalism like bolshevism is equal to economic stagnation; extremes meet).  The end of cheap oil did not help iether. In a sense neoliberalism might be viewed as the elite reaction to the end of cheap oil, when it became clear that there are not enough cookies for everyone.

This growth in the financial sector's profits has not been an accident; it is the result of  engineered shift in the elite thinking, which changed government policies. The central question of politics is, in my view, "Who has a right to live and who does not".  In the answer to this question, neoliberal subscribes to Social Darwinism: ordinary citizens should be given much less rather than more social protection. Such  policies would have been impossible in 50th and 60th (A Short History of Neo-liberalism)

In 1945 or 1950, if you had seriously proposed any of the ideas and policies in today's standard neo-liberal toolkit, you would have been laughed off the stage at or sent off to the insane asylum. At least in the Western countries, at that time, everyone was a Keynesian, a social democrat or a social-Christian democrat or some shade of Marxist.

The idea that the market should be allowed to make major social and political decisions; the idea that the State should voluntarily reduce its role in the economy, or that corporations should be given total freedom, that trade unions should be curbed and citizens given much less rather than more social protection--such ideas were utterly foreign to the spirit of the time. Even if someone actually agreed with these ideas, he or she would have hesitated to take such a position in public and would have had a hard time finding an audience.

And this change in government polices was achieved in classic Bolsheviks coup d'état way, when yoiu first create the Party of "professional neoliberal revolutionaries". Who then push for this change and "occupy" strategic places like economics departments at the universities, privately funded think tanks, MSM, and then subvert one or both major parties.  The crisis of "New Deal Capitalism" helped, but without network of think tanks and rich donors, the triumph of neoliberalism in the USA would have been impossible:

...one explanation for this triumph of neo-liberalism and the economic, political, social and ecological disasters that go with it is that neo-liberals have bought and paid for their own vicious and regressive "Great Transformation". They have understood, as progressives have not, that ideas have consequences. Starting from a tiny embryo at the University of Chicago with the philosopher-economist Friedrich von Hayek and his students like Milton Friedman at its nucleus, the neo-liberals and their funders have created a huge international network of foundations, institutes, research centers, publications, scholars, writers and public relations hacks to develop, package and push their ideas and doctrine relentlessly.

Most economists are acutely aware of the increasing role in economic life of financial markets, institutions and operations and the pursuit of prifits via excotic instruments such as derivatives (all this constituted  financialization). This dominant feature of neoliberalism has huge the re-distributional implications, huge effects on the US economy, international dimensions and monetary system, depth and longevity of financial crises and unapt policy responses to them.

They have built this highly efficient ideological cadre because they understand what the Italian Marxist thinker Antonio Gramsci was talking about when he developed the concept of cultural hegemony. If you can occupy peoples' heads, their hearts and their hands will follow.

I do not have time to give you details here, but believe me, the ideological and promotional work of the right has been absolutely brilliant. They have spent hundreds of millions of dollars, but the result has been worth every penny to them because they have made neo-liberalism seem as if it were the natural and normal condition of humankind. No matter how many disasters of all kinds the neo-liberal system has visibly created, no matter what financial crises it may engender, no matter how many losers and outcasts it may create, it is still made to seem inevitable, like an act of God, the only possible economic and social order available to us.  

Neoliberalism naturally leads to secular stagnation due to redistribution of wealth up. which undermines purchasing power of the 99%, or more correctly 99.9 of the population. In the USA this topic became hotly debated theme in establishment circles after Summers speech in 2013.  Unfortunately it was suppressed in Presidential campaign of 2016. Please note that Sanders speaks about Wall Street shenanigans, but not about ideology of neoliberalism.  No candidates tried to address this problem of "self-colonization" of the USA, which is probably crucial to "making America great again" instead of continued slide into what is called "banana republic" coined by American writer O. Henry (William Sydney Porter 1862–1910). Here is how Wikipedia described the term:

Banana republic or banana state is a pejorative political science term for politically unstable countries in Latin America whose economies are largely dependent on exporting a limited-resource product, e.g. bananas. It typically has stratified social classes, including a large, impoverished working class and a ruling plutocracy of business, political, and military elites.[1] This politico-economic oligarchy controls the primary-sector productions to exploit the country's economy.[2]

... ... ...

In economics, a banana republic is a country operated as a commercial enterprise for private profit, effected by a collusion between the State and favoured monopolies, in which the profit derived from the private exploitation of public lands is private property, while the debts incurred thereby are a public responsibility.

This topic is of great importance to the US elite because the USA is the citadel of  neoliberalism. It also suggest that the natural way neoliberal economic system based on increasing of the level of inequality (redistribution of wealth up) should behave: after the initial economic boom (like in case of steroids use) caused by  financialization of economy (as well as dissolution of the USSR), helped by off-shoring of manufacturing, the destructive effects of this temporary boost come into foreground. Redistribution of wealth up increases inequality which after a certain delay starts to undercuts domestic demand. It also tilts the demand more toward conspicuous consumption (note the boom of luxury cars sales in the USA).  

But after  inequality reaches certain critical threshold  the economy faces extended period of low growth reflecting persistently weak private demand (purchasing power of lower 90% of population).  People who mostly have low level service economy jobs (aka MC-jobs) can't buy that much.  Earlier giants of American capitalism like Ford understood that, but Wall Street sharks do not and does not want.  They operate under principle "Après nous le déluge" ("After us, the deluge").

An economic cycle enters recession when total spending falls below expected by producers and they realize that production level is too high relative to demand. What we have under neoliberalism is Marx's crisis of overproduction on a new level. At this level it is intrinsically connected with the parasitic nature of complete financialization of the economy. The focus on monetary policy and the failure to enact fiscal policy options is the key structural defect of neoliberalism ideology and can't be changed unless neoliberal ideology is abandoned. Which probably will not happen unless another huge crisis hits the USA. That might not happen soon.  Bolshevism lasted more then 70 years. If we assume that the "age of neoliberalism" started at 1973 with Pinochet coup d'état in Chile, neoliberalism as a social system is just 43 years old (as of 2016). It still has some "time to live"(TTL) in zombies state due to the principle first formulated by Margaret Thatcher as TINA ("There Is No Alternative") -- the main competitor, bolshevism, was discredited by the collapse of the USSR and China leadership adoption of neoliberalism. While Soviet leadership simply abandoned the sinking ship and became Nouveau riche in a neoliberal society that followed, Chinese elite managed to preserved at least outer framework of the Marxist state and the political control of the Communist party (not clear for how long). But there was a neoliberal transformation of Chinese economy, initiated, paradoxically, by the Chinese Communist Party.

Currently, no other ideology, including old "New Deal" ideology can  compete with neoliberal ideology, although things started to change with Sanders campaign in the USA on  the left and Trump campaign on the right. Most of what we see as a negative reaction to neoliberalism in Europe generally falls into the domain of cultural nationalism.    

The 2008 financial crisis, while discrediting neoliberalism as an ideology (in the same way as WWII discredited Bolshevism), was clearly not enough for the abandonment of this ideology. Actually neoliberalism proved to be remarkably resilient after this crisis. Some researchers claim that it entered "zombie state" and became more bloodthirsty and ruthless.

There is also religious overtones of neoliberalism which increase its longevity (similar to Trotskyism, and neoliberalism can be called "Trotskyism for rich"). So, from a small, unpopular sect with virtually no influence, neo-liberalism has become the major world religion with its dogmatic doctrine, its priesthood, its law-giving institutions and perhaps most important of all, its hell for heathen and sinners who dare to contest the revealed truth.  Like in most cults adherents became more fanatical believers after the prophecy did not materialized. The USA elite tried partially alleviate this problem by resorting to military Keynesianism as a supplementary strategy. But while military budget was raised to unprecedented levels, it can't reverse the tendency. Persistent high output gap is now a feature of the US economy, not a transitory state.

But there is another factor in play here: combination of peak (aka "plato" ;-) oil and established correlation of  the speed of economic growth and prices on fossil fuels and first of all on oil. Oil provides more than a third of the energy we use on the planet every day, more than any other energy source (How High Oil Prices Will Permanently Cap Economic Growth - Bloomberg). It is dominant fuel for transport and in this role it is very difficult to replace. 

That means that a substantial increase of price of oil acts as a fundamental limiting factor for economic growth. And "end of cheap oil" simply means that any increase of supply of oil to support growing population on the planet and economic growth now requires higher prices. Which naturally undermine economic growth, unless massive injection of currency are instituted. that probably was the factor that prevented slide of the US economy into the recession in 2009-2012.  Such a Catch-22.

Growth dampening potential of over $100-a-barrel oil is now a well established factor. Unfortunately, the reverse is not true. Drop of oil price to below $50 as happened in late 2014 and first half of 2015 did not increase growth rate of the USA economy. It might simply prevented it from sliding it into another phase of Great Recession. Moreover when  economies activity drops, less oil is needed.  Enter permanent stagnation.

Also there is not much oil left that can be profitably extracted at prices below $80. So the current oil price slump is a temporary phenomenon, whether it was engineered, or is a mixture of factors including temporary overcapacity . Sooner or later oil prices should return to level "above $80", as only at this level of oil price capital expenditures in new production make sense. That des not mean that oil prices can't be suppressed for another year or even two, but as Herbert Stein aptly noted   "If something cannot go on forever, it will stop,"

 The alien spaceship landing

Imagine the alien spaceship landed somewhere in the world. There would be denial, disbelief, fear, and great uncertainty for the future. World leaders would struggle to make sense of the events. The landing would change everything.

The secular stagnation (aka "end of permanent growth") is a very similar event.  This also is the event that has potential to change everything, but it is much more prolonged in time and due to this less visible ("boiling frog effect").  Also this is not a single event, but a long sequence of related events that probably might last several decades (as Japan had shown) or even centuries. The current "Great Recession" might be just a prolog to those events. It is clearly incompatible with capitalism as a mode of production, although capitalism as a social system demonstrated over the years tremendous adaptability and it is too early to write it down completely.  Also no clear alternatives exists. 

A very slow recovery and the secular stagnation is characteristic of economies suffering from a balance-sheet recession (aka crisis of overproduction), as forcefully argued by Nomura’s Richard Koo and other economists. The key point is that private investment is down, not because of “policy uncertainty” or “increased regulation”, but because business-sector expectations about future profitability have become dramatically depressed — and rationally so — in a context characterized by heavy indebtedness (of both households and corporations). As businesses see the demand falls they scale down production which creates negative feedback look and depresses demand further. 

The key point is that private investment is down, not because of “policy uncertainty” or “increased regulation”, but because business-sector expectations about future profitability have become dramatically depressed — and rationally so — in a context characterized by heavy indebtedness (of both households and corporations). As businesses see the demand falls they scale down production which creates negative feedback look and depresses demand further.   

Five  hypothesis about the roots of secular stagnation

There are at least five different hypothesis about the roots of secular stagnation:

Summers’s remarks and articles were followed by an explosion of debate concerning “secular stagnation”—a term commonly associated with Alvin Hansen’s work from the 1930s to ’50s, and frequently employed in Monthly Review to explain developments in the advanced economies from the 1970s to the early 2000s.2 Secular stagnation can be defined as the tendency to long-term (or secular) stagnation in the private accumulation process of the capitalist economy, manifested in rising unemployment and excess capacity and a slowdown in overall economic growth. It is often referred to simply as “stagnation.” There are numerous theories of secular stagnation but most mainstream theories hearken back to Hansen, who was Keynes’s leading early follower in the United States, and who derived the idea from various suggestions in Keynes’s General Theory of Employment, Interest and Money (1936).

Responses to Summers have been all over the map, reflecting both the fact that the capitalist economy has been slowing down, and the role in denying it by many of those seeking to legitimate the system. Stanford economist John B. Taylor contributed a stalwart denial of secular stagnation in the Wall Street Journal. In contrast, Paul Krugman, who is closely aligned with Summers, endorsed secular stagnation on several occasions in the New York Times. Other notable economists such as Brad DeLong and Michael Spence soon weighed in with their own views.3

Three prominent economists have new books directly addressing the phenomena of secular stagnation.4 It has now been formally modelled by Brown University economists Gauti Eggertsson and Neil Mehrotra, while Thomas Piketty’s high-profile book bases its theoretical argument and policy recommendations on stagnation tendencies of capitalism. This explosion of interest in the Summers/Krugman version of stagnation has also resulted in a collection of articles and debate, edited by Coen Teulings and Richard Baldwin, entitled Secular Stagnation: Facts, Causes and Cures.5

Seven years after “The Great Financial Crisis” of 2007–2008, the recovery remains sluggish. It can be argued that the length and depth of the Great Financial Crisis is a rather ordinary cyclical crisis. However, the monetary and fiscal measures to combat it were extraordinary. This has resulted in a widespread sense that there will not be a return to “normal.” Summers/Krugman’s resurrection within the mainstream of Hansen’s concept of secular stagnation is an attempt to explain how extraordinary policy measures following the 2007–2008 crisis merely led to the stabilization of a lethargic, if not comatose, economy.

But what do these economists mean by secular stagnation? If stagnation is a reality, does their conception of it make current policy tools obsolete? And what is the relationship between the Summers/Krugman notion of secular stagnation and the monopoly-finance capital theory?

... ... ...

In “secular stagnation,” the term “secular” is intended to differentiate between the normal business cycle and long-term, chronic stagnation. A long-term slowdown in the economy over decades can be seen as superimposed on the regular business cycle, reflecting the trend rather than the cycle.

In the general language of economics, secular stagnation, or simply stagnation, thus implies that the long-run potential economic growth has fallen, constituting the first pillar of MISS. This has been most forcefully argued for by Robert Gordon, as well as Garry Kasparov and Peter Thiel.6 Their argument is that the cumulative growth effect of current (and future) technological changes will be far weaker than in the past. Moreover, demographic changes place limits on the development of “human capital.” The focus is on technology, which orthodox economics generally sees as a factor external to the economy and on the supply-side (i.e., in relation to cost). Gordon’s position is thus different than that of moderate Keynesians like Summers and Krugman, who focus on demand-side contradictions of the system.

In Gordon’s supply-side, technocratic view, there are forces at work that will limit the growth in productive input and the efficiency of these inputs. This pillar of MISS emphasizes that it is constraints on the aggregate supply-side of the economy that have diminished absolutely the long-run potential growth.

The second pillar of MISS, also a supply-side view, goes back at least to Joseph Schumpeter. To explain the massive slump of 1937, Schumpeter maintained there had emerged a growing anti-business climate. Moreover, he contended that the rise of the modern corporation had displaced the role of the entrepreneur; the anti-business spirit had a repressive effect on entrepreneurs’ confidence and optimism.7 Today, this second pillar of MISS has been resurrected suggestively by John B. Taylor, who argues the poor recovery is best “explained by policy uncertainty” and “increased regulation” that is unfavorable to business. Likewise, Baker, Bloom, and Davis have forcefully argued that political uncertainty can hold back private investment and economic growth.8

Summers and Krugman, as Keynesians, emphasize a third MISS pillar, derived from Keynes’s famous liquidity trap theory, which contends that the “full-employment real interest rate” has declined in recent years. Indeed, both Summers and Krugman demonstrate that real interest rates have declined over recent decades, therefore moving from an exogenous explanation (as in pillars one and two) to a more endogenous explanation of secular stagnation.9 The ultimate problem here is lack of investment demand, such that, in order for net investment to occur at all, interest rates have to be driven to near zero or below. Their strong argument is that there are now times when negative real interest rates are needed to equate saving and investment with full employment.

However, “interest rates are not fully flexible in modern economies”—in other words, market-determined interest rate adjustments chronically fail to achieve full employment. Summers contends there are financial forces that prohibit the real interest rate from becoming negative; hence, full employment cannot be realized.10

Some theorists contend that there has been demographic structural shifts increasing the supply of saving, thus decreasing interest rates. These shifts include an increase in life expectancy, a decrease in retirement age, and a decline in the growth rate of population.

Others, including Summers, point out that stagnation in capital formation (or accumulation) can be attributed to a decrease in the demand for loanable funds for investment. One mainstream explanation offered for this is that today’s new technologies and companies, such as Google, Microsoft, Amazon, and Facebook, require far less capital investment. Another hypothesis is that there has been an important decrease in the demand for loanable funds, although they argue this is due to a preference for safe assets. These factors can function together to keep the real interest rate very low. The policy implication of secular low interest rates is that monetary policy is more difficult to implement effectually; during a recession, it is weakened and can even become ineffectual.

Edward Glaeser, focusing on “secular joblessness,” places severe doubt on the first pillar of MISS, but then makes a very important additional argument. Glaeser rejects the notion that there has been a slowdown in technological innovation; innovation is simply “unrelenting.” Likewise, he is far less concerned with secular low real interest rates, which may be far more cyclical. “Therefore,” contends Glaeser, “stagnation is likely to be temporary.”

Nonetheless, Glaeser underscores secular joblessness, and thus the dysfunction of U.S. labor markets constitutes a fourth pillar of MISS: “The dysfunction in the labour market is real and serious, and seems unlikely to be solved by any obvious economic trend.” Somehow, then, the problem is due to a misfit of skills or “human capital” on the side of workers, who thus need retraining. “The massive secular trend in joblessness is a terrible social problem for the US, and one that the country must try to address” with targeted policy.11 Glaeser’s argument for the dysfunction of U.S. labor markets is based on recession-generated shocks to employment, specifically of less-skilled U.S. workers. After 1970, when workers lost their job, the damage to human capital became permanent. In short, when human capital depreciates due to unemployment, overall abilities and “talent” are “lost” permanently. This may be because the skills required in today’s economy need to be constantly practiced to be retained. Thus, there is a ratchet-like effect in joblessness caused by recessions, whereby recession-linked joblessness is not fully reversed during recoveries—and all this is related to skills (the human capital of the workers), and not to capital itself. According to Glaeser, the ratchet-like effect of recession-linked joblessness is further exacerbated by the U.S. social-safety net, which has “made joblessness less painful and increased the incentives to stay out of work.”12

Glaeser contends that, if his secular joblessness argument is correct, the macroeconomic fiscal interventions argued for by Summers and Krugman are off-base.13 Instead, the safety net should be redesigned in order to encourage rather than discourage people from working. Additionally, incentives to work need to be radically improved through targeted investments in education and workforce training.14 Such views within the mainstream debate, emphasizing exogenous factors, are generally promoted by freshwater (conservative) rather than saltwater (liberal) economists. Thus, they tend to emphasize supply-side or cost factors.

The fifth pillar of MISS contends that output and productivity growth are stagnant due to a failure to invest in infrastructure, education, and training. Nearly all versions of MISS subscribe to some version of this, although there are both conservative and liberal variations. Barry Eichengreen underscores this pillar and condemns recent U.S. fiscal developments that have “cut to the bone” federal government spending devoted to infrastructure, education, and training.

The fifth pillar of MISS necessarily reflects an imbalance between public and private investment spending. Many theorists maintain that the imbalance between public and private investment spending, hence secular stagnation, “is not inevitable.” For example, Eichengreen contends if “the US experiences secular stagnation, the condition will be self-inflicted. It will reflect the country’s failure to address its infrastructure, education and training needs. It will reflect its failure to…support aggregate demand in an effort to bring the long-term unemployed back into the labour market.”15

The sixth pillar of MISS argues that the “debt overhang” from the overleveraging of financial firms and households, as well as private and public indebtedness, are a serious drag on the economy. This position has been argued for most forcefully by several colleagues of Summers at Harvard, most notably Carmen Reinhart and Kenneth Rogoff.16 Atif Mian and Amir Sufi also argue that household indebtedness was the primary culprit causing the economic collapse of 2007–2008. Their policy recommendation is that the risk to mortgage borrowers must be reduced to avoid future calamities.17

As noted, the defenders of MISS do not necessarily support a compatibility between the above six pillars: those favored by conservatives are supply-side and exogenous in emphasis, while liberals tend towards demand-side and endogenous ones. Instead, most often these pillars are developed as competing theories to explain the warrant of some aspect of secular stagnation, and/or to defend particular policy positions while criticizing alternative policy positions. However, the concern here is not whether there is the possibility for a synthesis of mainstream views. Rather, the emphasis is on how partial and separate such explanations are, both individually and in combination.

Neoliberal economy actually needs bubbles to function

As Krugman said "We now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the latter part of the 90s expansion; and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate." In other words blowing bubbles is the fundamental way neoliberal economy functions, not an anomaly.

As much as the USA population is accustomed to hypocrisy of the ruling elite and is brainwashed by MSM, this news, delivered to them personally by the crisis of 2008 was too much for them not question the fundamentals (A Primer on Neoliberalism):

Of course, the irony that those same institutions would now themselves agree that those “anti-capitalist” regulations are required is of course barely noted. Such options now being considered are not anti-capitalist. However, they could be described as more regulatory or managed rather than completely free or laissez faire capitalism, which critics of regulation have often preferred.

But a regulatory capitalist economy is very different to a state-based command economy, the style of which the Soviet Union was known for. The points is that there are various forms of capitalism, not just the black-and-white capitalism and communism. And at the same time, the most extreme forms of capitalism can also lead to the bigger bubbles and the bigger busts.

In that context, the financial crisis, as severe as it was, led to key architects of the system admitting to flaws in key aspects of the ideology.

At the end of 2008, Alan Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Federal Reserve had been long and lauded, and Congress wanted to know what had gone wrong. Henry Waxman questioned him:

[Greenspan’s flaw] warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the president’s senior economic advisor, has had to come to terms with a similar error—his view that the market was inherently self-stabilizing has been “dealt a fatal blow.” Hank Paulson, Bush’s treasury secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBC’s Mad Money admitted defeat: “The only guy who really called this right was Karl Marx.” One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.

Raj Patel, Flaw PDF formatted document, The Value of Nothing, (Picador, 2010), pp.4, 6-7

Now for the second time in history, the challenge is to save capitalism from itself

Now for the second time in history, the challenge is to save capitalism from itself: to recognize the great strengths of open, competitive markets while rejecting the extreme capitalism and unrestrained greed that have perverted so much of the global financial system in recent times. It took such a statesman as Franklin Delano Roosevelt to rebuild American capitalism after the Great Depression. New Deal policies allowed to rebuild postwar domestic demand, to engineer the Marshall Plan to rebuild Europe and to set in place the Bretton Woods system to govern international economic engagement.

With the abolishment of those policies blowing of one bubble after another, each followed by a financial crisis  became standard chain of the events. Since 1973 we already have a half-dozen bubbles following by economic crisis. It started with  Savings and loan crisis which partially was caused by the deregulation of S&Ls in 1980, by the Depository Institutions Deregulation and Monetary Control Act signed by President Jimmy Carter on March 31, 1980, an important step is a series that eliminated regulations initially designed to prevent lending excesses and minimize failures.

To hide this unpleasant fact neoliberals resort to so called the Great Neoliberal Lie:

What is neoliberalism

The fallacious and utterly misleading argument that the global economic crisis (credit crunch) was caused by excessive state spending, rather than by the reckless gambling of the deregulated, neoliberalized financial sector.

Just as with other pseudo-scientific theories and fundamentalist ideologies, the excuse that "we just weren't fundamentalist enough last time" is always there. The neoliberal pushers of the establishment know that pure free-market economies are as much of an absurd fairytale as 100% pure communist economies, however they keep pushing for further privatizations, tax cuts for the rich, wage repression for the ordinary, and reckless financial sector deregulations precisely because they are the direct beneficiaries of these policies. Take the constantly widening wealth gap in the UK throughout three decades of neoliberal policy. The minority of beneficiaries from this ever widening wealth gap are the business classes, financial sector workers, the mainstream media elite and the political classes. It is no wonder at all that these people think neoliberalism is a successful ideology. Within their bubbles of wealth and privilege it has been. To everyone else it has been an absolute disaster.

Returning to a point I raised earlier in the article; one of the main problems with the concept of "neoliberalism" is the nebulousness of the definition. It is like a form of libertarianism, however it completely neglects the fundamental libertarian idea of non-aggression. In fact, it is so closely related to that other (highly aggressive) US born political ideology of Neo-Conservatism that many people get the two concepts muddled up. A true libertarian would never approve of vast taxpayer funded military budgets, the waging of imperialist wars of aggression nor the wanton destruction of the environment in pursuit of profit.

Another concept that is closely related to neoliberalism is the ideology of minarchism (small stateism), however the neoliberal brigade seem perfectly happy to ignore the small-state ideology when it suits their personal interests. Take the vast banker bailouts (the biggest state subsidies in human history) that were needed to save the neoliberalised global financial sector from the consequences of their own reckless gambling, the exponential growth of the parasitic corporate outsourcing sector (corporations that make virtually 100% of their turnover from the state) and the ludicrous housing subsidies (such as "Help to Buy and Housing Benefits) that have fueled the reinflation of yet another property Ponzi bubble.

The Godfather of neoliberalism was Milton Friedman. He made the case that illegal drugs should be legalised in order to create a free-market drug trade, which is one of the very few things I agreed with him about. However this is politically inconvenient (because the illegal drug market is a vital source of financial sector liquidity) so unlike so many of his neoliberal ideas that have consistently failed, yet remain incredibly popular with the wealthy elite, Friedman's libertarian drug legalisation proposals have never even been tried out.

The fact that neoliberals are so often prepared to ignore the fundamental principles of libertarianism (the non-aggression principle, drug legalisation, individual freedoms, the right to peaceful protest ...) and abuse the fundamental principles of small state minarchism (vast taxpayer funded bailouts for their financial sector friends, £billions in taxpayer funded outsourcing contracts, alcohol price fixing schemes) demonstrate that neoliberalism is actually more like Ayn Rand's barmy (greed is the only virtue, all other "virtues" are aberrations) pseudo-philosophical ideology of objectivism  than a set of formal economic theories.

The result of neoliberal economic theories has been proven time and again. Countries that embrace the neoliberal pseudo-economic ideology end up with "crony capitalism", where the poor and ordinary suffer "austerity", wage repression, revocation of labor rights and the right to protest, whilst a tiny cabal of corporate interests and establishment insiders enrich themselves via anti-competitive practices, outright criminality and corruption and vast socialism-for-the-rich schemes.

Neoliberal fanatics in powerful positions have demonstrated time and again that they will willingly ditch their right-wing libertarian and minarchist "principles" if those principles happen to conflict with their own personal self-interest. Neoliberalism is less of a formal set of economic theories than an error strewn obfuscation narrative to promote the economic interests, and  justify the personal greed of the wealthy, self-serving establishment elite.
 

Bubbles as the neoliberal tool for wealth redistribution

The 1930s, a well researched period of balance-sheet recession, provides some interesting perspective despite large historical distance.  Roosevelt was no socialist, but his New Deal did frighten many businesses, especially large business which BTW attempted a coupe to remove him from is position. Fortunately for Roosevelt CIA did not exist yet.  And New Deal  government projects has been much bigger and bolder, then anything Obama ever tried, because Obama administration was constrained in its action by dominant neoliberal thinking. Like regulatory capture, which is an immanent feature of neoliberalism,  there is also less known and less visible ideological capture of the government. Which also makes neoliberalism more similar to bolshevism as this ideological capture and related inability of the USSR elite to modernize the economy on some "mixed" principles, when over-centralization stopped working. It, along with the collapse of the ideology,  probably was one of the main reasons of the collapse of the USSR.  Chinese leadership managed to do this and introduced "new economic policies"(NEP). 

Uner New deal regime when public investment and hence aggregate demand expanded, the economy started to grow anyway. Roosevelt did have a vision and he did convince the electorate about the way to go. Cheap optimism of Reagan, or even audacity of hope "Obama style" were not enough. After all, as Francis Bacon may remind us: “Hope is a good breakfast, but it is a bad supper” (Apophthegms, 1624).

Obama/Bernanke-style attempts to stimulate growth by pure injection of cheap money in this environment not only inflate new bubbles instead of old one, with which the fighting starts. They also lead to massive redistribution of wealth that makes the problem even worse:

Paul Krugman tells us that Larry Summers joined the camp concerned about secular stagnation in his I.M.F. talk last week, something that I had not picked up from prior coverage of the session. This is good news, but I would qualify a few of the points that Krugman makes in his elaboration of Summers' remarks.

First, while the economy may presently need asset bubbles to maintain full employment (a point I made in Plunder and Blunder: The Rise and Fall of the Bubble Economy), it doesn't follow that we should not be concerned about asset bubbles. The problem with bubbles is that their inflation and inevitable deflation lead to massive redistribution of wealth.

Larry Summers was the first establishment economist who conceded that this is the fact (Wikipedia)

... Larry Summers presented his view during November 2013 that secular (long-term) stagnation may be a reason that U.S. growth is insufficient to reach full employment: "Suppose then that the short term real interest rate that was consistent with full employment [i.e., the "natural rate"] had fallen to negative two or negative three percent. Even with artificial stimulus to demand you wouldn't see any excess demand. Even with a resumption in normal credit conditions you would have a lot of difficulty getting back to full employment."[13][14]

Robert J. Gordon wrote in August 2012:

"Even if innovation were to continue into the future at the rate of the two decades before 2007, the U.S. faces six headwinds that are in the process of dragging long-term growth to half or less of the 1.9 percent annual rate experienced between 1860 and 2007. These include demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. A provocative 'exercise in subtraction' suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades".[15]

One hypothesis is that high levels of productivity greater than the economic growth rate are creating economic slack, in which fewer workers are required to meet the demand for goods and services. Firms have less incentive to invest and instead prefer to hold cash. Journalist Marco Nappolini wrote in November 2013:

 "If the expected return on investment over the short term is presumed to be lower than the cost of holding cash then even pushing interest rates to zero will have little effect. That is, if you cannot push real interest rates below the so-called short run natural rate [i.e., the rate of interest required to achieve the growth rate necessary to achieve full employment] you will struggle to bring forward future consumption, blunting the short run effectiveness of monetary policy...Moreover, if you fail to bring it below the long run natural rate there is a strong disincentive to increase fixed capital investment and a consequent preference to hold cash or cash-like instruments in an attempt to mitigate risk. This could cause longer-term hysteresis effects and reduce an economy's potential output."[13] 

Cost of energy as a defining new factor

The cost of energy is probably another reason of secular stagnation along with excessive public and private debt. Rising cost of energy is deadly for capitalism.  Here are some comments that might clarify the situation:

raskolnikov:

This is the biggest crybaby column Krugman's ever written. He should be ashamed of himself and return his Nobel prize immediately. Has he ever put down Keynes long enough to read a little Marx?  Here's Robert Brenner summing it up in 2009:

 What mainly accounts for the long-term weakening of the real economy is a deep, and lasting, decline of the rate of return on capital investment since the end of the 1960s.

The failure of the rate of profit to recover is all the more remarkable, in view of the huge drop-off in the growth of real wages over the period.

The main cause, though not the only cause, of the decline in the rate of profit has been a persistent tendency to overcapacity in global manufacturing industries."

 There's more, too. Instead of siding with crackpot Summers, Krugman should expand his research and be of some use to us all.

Kievite

I am not sure that it is correct to think about public debt as internal debt. It's all about energy.

That means that public debt is to a large extent foreign due to unalterable oil consumption (and related trade deficits). And that completely changes the situation unless you are the owner of the world reserve currency.

But even in the latter case (exorbitant privilege as Valéry Giscard d'Estaing called it ) you can expect attacks on the status of the currency as world reserve currency. The growth is still supported via militarization, forced opening of foreign markets (with military force, if necessary) and conversion of the state into national security state. But as Napoleon admitted "You can do anything with bayonets except sit on them"

One positive thing about high public (and to a large extent foreign owned) debt in the USA is that it undermines what Bacevich called "new American militarism" (http://www.amazon.com/The-New-American-Militarism-Americans/dp/0195173384). Bacevich argues that this is distinct political course adopted by the "defense intellectuals," the evangelicals, and the neocons. And they will never regret their failed efforts such as Iraq invasion.

From Amazon review:

=== Quote ===

Bacevich clearly links our present predicaments both at home and abroad to the ever greater need for natural resources, especially oil from the Persian Gulf. He demolishes all of the reasons for our bellicosity based on ideals and links it directly to our insatiable appetite for oil and economic expansion. Naturally, like thousands of writers before him, he points out the need for a national energy policy based on more effective use of resources and alternative means of production.

=== End of Quote ==

Heinberg's Five Axioms of Sustainability

As Heinberg explained fossil fuels, primarily oil, permeate every aspect of our modern culture - from agriculture to cities and a long-term perspective. In the age of almost 7 billion people demanding more and more of limited resources, the media, politicians and governments tend to only report short-term perspectives and ignore Heinberg's Five Axioms of Sustainability to the extent that these concepts are taboo to be spoken, discussed or thought (Heinberg, Richard (2007) Five Axioms of Sustainability):

1. (Tainter’s Axiom): Any society that continues to use critical resources unsustainably will collapse.

Exception: A society can avoid collapse by finding replacement resources.

Limit to the exception: In a finite world, the number of possible replacements is also finite.

...

2. (Bartlett’s Axiom): Population growth and/or growth in the rates of consumption of resources cannot be sustained.

...

3. To be sustainable, the use of renewable resources must proceed at a rate that is less than or equal to the rate of natural replenishment.

...

4. To be sustainable, the use of non-renewable resources must proceed at a rate that is declining, and the rate of decline must be greater than or equal to the rate of depletion.

The rate of depletion is defined as the amount being extracted and used during a specified time interval (usually a year) as a percentage of the amount left to extract.

...

5. Sustainability requires that substances introduced into the environment from human activities be minimized and rendered harmless to biosphere functions.

In cases where pollution from the extraction and consumption of non-renewable resources that has proceeded at expanding rates for some time threatens the viability of ecosystems, reduction in the rates of extraction and consumption of those resources may need to occur at a rate greater than the rate of depletion. 

Archaeologist Joseph Tainter, in his classic study The Collapse of Complex Societies (1988), demonstrated that collapse is a frequent if not universal fate of complex societies and argued that collapse results from declining returns on efforts to support growing levels of societal complexity using energy harvested from the environment.  Jared Diamond’s popular book Collapse: How Societies Choose to Fail or Succeed (2005) similarly  makes the argument that collapse is the common destiny of societies that ignore resourse constraints. This axiom defines sustainability by the consequences of its absence—that is, collapse.

Historical periods of stagnation in the United States

Adapted from Wikipedia

Excluding the current, there were two period of stagnation in the USA history:

Construction of structures, residential, commercial and industrial, fell off dramatically during the depression, but housing was well on its way to recovering by the late 1930s.[17]

The depression years were the period of the highest total factor productivity growth in the United States, primarily to the building of roads and bridges, abandonment of unneeded railroad track and reduction in railroad employment, expansion of electric utilities and improvements wholesale and retail distribution.[17]

The war created pent up demand for many items as factories that once produced automobiles and other machinery converted to production of tanks, guns, military vehicles and supplies. Tires had been rationed due to shortages of natural rubber; however, the U.S. government built synthetic rubber plants. The U.S. government also built synthetic ammonia plants, aluminum smelters, aviation fuel refineries and aircraft engine factories during the war.[17] After the war commercial aviation, plastics and synthetic rubber would become major industries and synthetic ammonia was used for fertilizer. The end of armaments production free up hundreds of thousands of machine tools, which were made available for other industries. They were needed in the rapidly growing aircraft manufacturing industry.[18]

The memory of war created a need for preparedness in the United States. This resulted in constant spending for defense programs, creating what President Eisenhower called the military-industrial complex.

U.S. birth rates began to recover by the time of World War II, and turned into the baby boom of the postwar decades. A building boom commenced in the years following the war. Suburbs began a rapid expansion and automobile ownership increased.[17]

High-yielding crops and chemical fertilizers dramatically increased crop yields and greatly lowered the cost of food, giving consumers more discretionary income. Railroad locomotives switched from steam to diesel power, with a large increase in fuel efficiency. Most importantly, cheap food essentially eliminated malnutrition in countries like the United States and much of Europe.

Many trends that began before the war continued:

Researchers who contributed to understating secular stagnation

One of the first researchers who clearly attributed secular stagnation problem to neoliberalism was Alan Nasser, Professor Emeritus of Political Economy and Philosophy at The Evergreen State College. In his September 22, 2005 paper  ECONOMIC LAWS, STRUCTURAL TENDENCIES, SECULAR STAGNATION THEORY, AND THE FATE OF NEOLIBERALISM  he pointed out the key features of secular stagnation long before Summers started to understand the problem  and even befor the economic crash of 2008 ;-)

September 22, 2005 | alannasser.org

Alan Nasser Invited presentation, University of Lille,

"We have now grown used to the idea that most ordinary or natural growth processes (the growth of organisms, or popu- lations of organisms or, for example, of cities) is not merely limited, but self-limited, i.e. is slowed down or eventually brought to a standstill as a consequence of the act of growth itself. For one reason or another, but always for some reason, organisms cannot grow indefinitely, just as beyond a certain level of size or density a population defeats its own capacity for further growth."

Sir Peter Medawar, The Revolution of Hope

"A business firm grows and attains great strength, and afterwards perhaps stagnates and decays; and at the turning point there is a balancing or equilibrium of the forces of life and decay. And as we reach to the higher stages of our work, we shall need ever more and more to think of economic forces as those which make a young man grow in strength until he reaches his prime; after which he gradually becomes stiff and inactive, till at last he sinks to make room for other and more vigorous life."

Alfred Marshall, Principals of Economics (1890)

"Though Keynes's 'breakdown theory is quite different from Marx's, it has an important feature in common with the latter: in both theories, the breakdown is motivated by causes inherent to the working of the economic engine, not by the action of factors external to it."

Joseph Schumpeter, Ten Great Economists

In this paper I shall address two major issues. Firstly, I shall discuss the implications for economic theory of a conception of economic laws widely at variance with the empiricist and/or positivist account of what laws are, how they are discovered, and how they are related to theory. At the same time, I will reject one cornerstone of anti-positivist thought, namely the idea that one cannot provide an account of laws that is fundamentally the same for the natural and the social sciences. Thus, I shall argue that an anti-positivist account of laws is entirely compatible with a conception of scientific laws that applies to both the "hard" (natural) and the "soft" (social) sciences. I shall defend this position by showing its application to economics and economic laws. In doing so, I will compare and contrast both natural-scientific (primarily physical) laws and social-scientific (primarily economic) laws. Secondly, I will argue that perhaps the most significant economic law descriptive of mature capitalism is the law of secular stagnation. The latter states that it is the natural tendency of a developed, industrialized capitalist economy to default to a state of chronic excess capacity and underconsumption. And this is itself a result of the tendency in advanced capitalism for the economic surplus (roughly, the difference between the Gross Domectic Product and the cost of producing the GDP) to grow at a rate more rapid than the growth of profitable industrial investment opportunities. In the course of my discussion I will use the United States as a paradigm case, Much as Marx attempted to identify the underlying features of the accumulation process by reference to England during the Industrial Revulution.

This has in fact been the state of global capital since the end of the "Golden Age" and the commencement of the age of globalized Reaganism/Thatcherism, i.e. the Age of Neoliberalism. I date the transition as commencing in 1973, the last year of post-War Keynesian growth rates in the USA. In fact, I will argue, neoliberal economic policy exacerbates capitalism'a tendency to stagnation. Let me begin with an account of economic laws.

LAWS, GENERATIVE MECHANISMS AND TENDENCIES

On the Humean or radical empiricist (positivist) account of laws, the latter are descriptions of observed regularities. Presumably, the scientist observes a "constant conjunction" of different kinds of happening, and infers from the regularity of the conjunction that the latter could not be merely accidental, and so concludes that the observed pattern of regularities must be nomological or law-like. 'Sodium chloride dissolves in water' and 'Metal expands when heated' would be simple examples of the results of this account of how laws of nature are discovered.

That this empiricist account is flawed becomes evident when we consider full-fledged laws of a genuine natural science, e.g. physics. I emphasize that laws are components of theories, which themselves are constitutive of established scientific disciplines, such as physics, chemistry, and biology. In fact, the two "laws" mentioned at the end of the preceding paragraph are not laws of physics at all. Among the genuine laws of physics is, e.g., 'Falling bodies near the surface of the earth accelerate at a constant rate.' This law is certainly not established by the observation of repeated conjunctions of events. On the contrary, actually observed falling bodies in "open systems", that is, in the circumstances of everyday life, conspicuously fail to conform to this law. Yet this is not taken to refute the law. For the law describes the behavior of bodies in a vacuum, that is to say, in a "closed system", one created by the scientist, typically in a laboratory situation. Philosophers of science have tended to ignore the distinction between regularities observed only in closed systems, and conjunctions observed in everyday life, which, as such, have no value as contributions to scientific knowledge. These philosophers have, accordingly, written as if the regularities in question were features of open systems, of nature. This confusion impedes our understanding of all types of laws, from physical to economic.

This failure –until relatively recently- of philosophers of science to properly attend to the importance of laboratory work in the acquisition of scientific knowledge is due to the fact that these philosophers have focused almost exclusively on science as established theory, i.e. as a way of representing the world. They had ignored how these theories were actually established. That is, they paid little attention to experiment, which is a way of intervening in the world. This inattention to what happens in closed systems created in the laboratory led thinkers to miss the importance of the concept of tendencies or dispositions in grasping the concept of a law of science. Let us dwell on this point and its relation to economic laws.

It is not that our knowledge of natural laws is not based on observed regularities. The point, rather, is that these regularities are not found in nature. They are found in closed systems, elaborately designed experimental circumstances found in laboratories. Yet, we correctly believe that what we learn in experimental situations gives us knowledge that is not confined to these situations. We believe that what we learn from observations of repeated patterns in experiments gives us not only knowledge of the behavior of objects in laboratory circumstances, but also knowledge of these same (kinds of) objects as they behave in nature, in the open systems of everyday life. But scientifically significant repeated patterns are not found in the world of daily life. This raises profound epistemological and ontological questions.

The most significant epistemological question arises from the following consideration: Were it not for the intervention of the experimenter, closed-system regularities would not obtain. Hence, the experimenter is a causal agent of the pattern of regularities observed in the laboratory. It is these contrived conjunctions which we invoke to justify our belief in (usually causal) laws. And while these regularities are the (partial) result of the intervention of the experimenter, we do not believe that the experimenter in any way originates the laws whose existence is attested to by the contrived regularities. The question therefore arises: What justifies our (correct) belief that knowledge obtained in closed laboratory systems designed by an agent applies also in open systems, i.e. in nature, which of course is not designed by scientists and does not evidence the regularities found under designed experimental circumstances?

I want to suggest that this question comes to the same as the following question: What must nature be like, and what must experiment reveal, in order for experimental knowledge to be able to be legitimately extended to the world outside of the laboratory, i.e. to nature? Note that this is a Realist question: it asks what we must presuppose about the constitution of the world in order that our experimentally-based scientific beliefs be justified. This is the precise Realist counterpart to Kant's Idealist question: What must we presoppose our minds –as opposed to nature or the world- to be like in order for scientific knowledge to be possible? I will argue that the answer to our Realist question provides the conceptual resources to elucidate the general nature of economic laws and economic theory, and the nature of the subject matter investigated by economists.

I will argue that since we believe that what we learn by experimental observation justifies our claim to knowledge of the experimental objects as they behave in nature, we must assume that these objects possess natural structures, similar to what Aristotle and the scholastics called "natures" or "essences." A natural structure must be conceived as what Critical Realists call a generative mechanism (hereafter, GM). The latter is a specific mode of material organization. What GMs generate are tendencies or dispositions to behave in characteristic ways. The statement that a physical thing or a social institution or structure tends to generate characteristic regularities is a statement of a law. The natural structure of salt, expressed in chemistry as HCl, is such that when it is mixed with water, whose natural structure or organization is expressed as H2O, it tends to dissolve. Gases tend to expand when heated and falling bodies near the surface of the earth tend to accelerate at a constant rate. These are statements of chemical and physical laws. We shall see that precisely the same kind of analysis can be made of laws in economics.

Tendencies are not the same as trends. The latter are merely observed regularities; there need be no implication that an underlying structural feature of the thing in question generates the regularity. This feature of laws is reflected in ordinary language in non-scientific contexts: we might say "He has a tendency to exaggerate." We mean that a disposition to exaggerate is a natural expression of his underlying character. We do not usually mean that he exaggerates whenever it is possible for him to exaggerate. This is part of the meaning of 'tendency.' Thus, tendencies can exist without being exercised. This happens when, e.g. salt is not mixed with water. Salt's nomological tendency to dissolve in water remains its categorical property even in the absence of circumstances in which its tendency to dissolve can be exercised. In addition, tendencies can be exercised without being realized. This is the case in the natural sciences when we observe, in non-laboratory situations, falling bodies accelerating at different rates. Indeed, no falling body in open systems is observed to accelerate at a constant or the same rate. But of course this is not taken to falsify the law of falling bodies. In nature, GMs continue to act in their characteristic ways without producing the patterned outcomes observable in closed experimental systems. This is so because in nature a multiplicity of GMs combine, interact and collide such as to result in the (scientifically irrelevant) flux of phenomena of the everyday world. The realization of a natural tendency can, in other words, be offset by counteracting forces. Thus, empiricism's mistake is to fail to recognize that GMs operate independent of the effects they generate. That is, GMs endure and go on acting (in the way that experimental closure enables us to identify) in nature, i.e. in open systems, where patterned regularities do not prevail. Statements about tendencies are not equivalent, salva veritate, to statements about their effects. Laws may exist and exercise their tendencies or powers even though no Humean "constant conjunctions" are observed. (This would be the case if it happened that the practice of creating closed experimental conditions had never been engaged in, i.e. in a world without science.)

LAWS, GENERATIVE MECHANISMS AND TENDENCIES IN ECONOMICS

GMs are not confined to the natural world. Natural structures are not the only structures there are. Plainly, there are humanely constructed structures. Capitalism is one such structure. Structures of this kind, GMs, that are dynamic by nature, i.e. which are characteristically diachronic, be they natural or socially constituted, share the same ontology. This should not be confused with the radical empiricist (positivist) claim that the natural and the social sciences share the same method. Clearly they do not: closed experimental situations exist but are not typical i istic outcomes ceteris paribus, ie. other things being equal, i.e. ceteris absentibus, other things being absent. When we identify the tendency of a thing, we specify what will happen, as a matter of course, if interfering conditions are absent. That is the point of vacuums in the closed systems created in laboratory experiments: they permit exercised tendencies, i.e. tendencies in operation, to be realized. If we want to know what gases tend to do when acted upon by heat, we eliminate all potential counteracting forces by creating a vacuum in the chamber, so that both gas and heat can express their natures unimpeded.

Thus, implicit in both physical- and social-scientific practice is the crucial distinction between the exercise and the realization (or manifestation) of a tendency. This distinction is essential to structural analysis in economics because of the impossibility of creating the social equivalent of a vacuum in the social sciences, which deal with the open systems of everyday life, where a great many forces and tendencies collide. Accordingly, just as the law of the tendency of falling bodies to accelerate at a constant rate is not falsified by the failure of falling bodies to behave accordingly in open systems, so too, e.g., the law of the tendency of the growth of productive capacity to outpace the growth of profitable investment opportunities -the thesis of secular stagnation theory- is not undermined by the remarkable growth rates of the Golden Age. In both cases, the presence of offsetting factors prevents the structurally generated tendency from being realized or manifested. I argue that the same can be said for any putative economic law.

In social science –and this is most conspicuous in economics, the most theoretically developed of the human sciences- we compensate for the absence of experimentally closed systems by constructing their functional equivalent, which we might call, in terms redolent of Weber, an ideal-typical theoretical model. It is an unfortunate habit (perhaps a tendency in the above-elaborated sense…) of mainstream economists to employ these models as if they described the open-system observable facts of economic life. This is, I suspect, a consequence of the economic empiricist's mistake referred to above, namely to think that GMs, if they must be spoken of at all, are to be conceived as reducible to their effects. (Recall Hume's claim, inspired by his reading of Newton, to expunge all notions of "power", "generation" and "production" from his analyses.) But, as noted above, GMs in both the social and the natural sciences employ unrealistic models, i.e. models which do not pretend to offer the equivalent of a photographic representation of the world. In both natural-scientific experiments and social-scientific ideal-type models, an attempt is made to abstract from the nonessential. We seek to place the spotlight of theory on what is necessary to the situation, system or institution under investigation, and to prescind from the arbitrary and accidental. In economics we seek to identify those features of capitalism that make it what it is. This enables us to identify capitalism's distinct and characteristic tendencies, and to describe what will happen as a result of the exercise of these tendencies, ceteris absentibus.

That there are such tendencies seems to me to be uncontroversial. We all know, for example, that cyclical downturns are not mere empirical contingencies of capitalist development, but structurally generated tendencies which follow inexorably from the specific mode of organization (structure) of capitalism. And like all tendencies, their realization can be offset, as we have seen above, by counteracting factors, such as fiscal and monetary policy. Other examples would be what Marx called the tendencies of capital to concentrate and centralize. The tendency, and corresponding law, with which I will be primarily concerned in this paper is constitutive of the theory of secular stagnation, and is far more likely than the immediately foregoing examples to generate controversy. I refer to the tendency of mature capitalism to suffer from a chronic paucity of profitable industrial investment opportunities, relative to the great magnitude of its investable surplus. Let us look more closely at this tendency.

THE THEORY OF SECULAR STAGNATION

It is worth mentioning that the view that the continuous accumulation of capital is both essential to the normal development of capitalist societies and essentially self-limiting was held by virtually all of the major modern political economists, in the form of one version or another of the doctrine of the falling rate of profit. Adam Smith explained the secular decline of the profit rate by the increasing abundance of capital in a developing capitalist society. Ricardo and Mill believed that the rate of profit would be depressed by the diminishing productivity of the land which would drive up the price of wage goods and therefore of the wages of labor, and so drive down the profits of capital. Marx pointed to the increasing capital-intensity of industry and the paucity of working-class purchasing power relative to the productive capacity of the economy, as the principal threat to the profit rate. And Keynes held that in mature capitalist economies the "marginal efficiency of capital", i.e. the expected rate of return (over cost) on an additional unit of a given capital asset, would tend to decline. All these thinkers had an at least intuitive appreciation of the fact that the growth of capital tends to be terminally self-limiting. (It is worth citing a remark of Joseph Shumpeter at this point:

"Though Keynes's 'breakdown theory is quite different from Marx's, it has an important feature in common with the latter: in both theories, the breakdown is motivated by causes inherent to the working of the economic engine, not by the action of factors external to it.")

In my estimation, no one understood the underlying dynamics of the tendency to stagnation better than the Polish economist Michal Kalecki, who is known to have developed the essentials of Keynes's General Theory before Keynes himself (and to have produced far more elegant mathematical formulations thereof). Perhaps the best way to understand Kalecki's thought is to see him as having argued that certain features of a not-yet-mature industrializing economy persist after the process of industrialization has been accomplished, with the effect that the developed capitalist economy is saddled with a problem of chronic excess capacity. Let me sketch this train of thought.

In the course of their natural growth capitalist economies reach a level of industrial development characterizable as maturity, a point beyond which growth must either cease, or be sustained by exogenous (in a sense to be elucidated below) means. Straight away we are confronted with a rejection of an assumption that is implicit in mainstream neoclassical theory, viz. that both the supply and the demand curves shift, virtually automatically, to the right. On the stagnationist conceptualization of growth or development, the process of development is not everlasting, but rather is at some point accomplished. There is the period, industrialization, during which the economy is developing, and which culminates in a (finally) industrialized or developed infrastructure. At this stage there will have been built up, or "accumulated", a complement of plant and equipment in steel production, machine tools, power stations, transport systems, etc., that is capable of satisfying a level of consumption demand consistent with the moral limits of a reasonably civilized style of life, the constraints imposed by a finite fund of natural resources, and, most importantly for stagnation theory, the limited possibilities of what Marx called "expanded reproduction" imposed by the accumulation process itself.

This account point can be expanded as follows. During any period of industrialization, the growth of the capital goods industry (hereafter, following Marx, Department I, or DI) must outpace the growth of the consumption goods industries (hereafter, again following Marx, Department II, or DII). Indeed, it belongs to the nature of the process of industrialization that the demand for the output of DI cannot be a function of the behavior of consumption demand; during industrialization, investment demand is both rapid and relatively autonomous. For if the principal project is to develop the means of production, then a disproportionate share of national wealth must be devoted to investment/accumulation at the expense of consumption. Strategic capital goods such as transport and communications networks and steel mills cannot be built bit by bit. This is clear with respect to railroads (Recall Keynes's remark that "Two pyramids are better than one, and two masses for the dead better than one; but two railroads from London to York are not necessarily better than one."), but perhaps not as clear with respect to steel facilities.

Suppose 1) that the efficient production of steel requires equipment with the capacity to produce 200,000 tons of steel, and 2) that demand turns out to be for 300,000 tons. The investor has two alternatives, either to forgo an extra market or to take a chance and add another 200.000 tons. On the second alternative, the one virtually assured in a period of (rapid) industrialization, the manufacturer is left with a surplus capacity of 100,000 tons. Here we see, writ small, a crucial source of two basic tendencies of capitalist development, the unrelenting pressure to expand markets, and the tendency to overproduction of a specific kind, namely the overproduction of capital goods, the tendency to overaccumulation. Each of these tendencies is the basis of a corresponding law of economics: Wherever we find a competitive, profit-driven market economy, we must also find a system-driven tendency to expand markets, and: Wherever we find a competitive, profit-driven market economy, we must also find a system-driven tendency for the growth of productive capacity to outpace the growth of effective demand.

As we have seen, all the major classical political economists anticipated the stationary state; they all assumed that the period of development or industrialization would come to an end. Basic industries would be in place, and DI would be capable of meeting all the replacement and expansion demands of DII. Prescinding for the moment from the emergence of new industries, DI would no longer be a source of substantial expansion demand for its own output; most of DI's internal expansion demand would be extinct.

But this is not th hread of classical (and perhaps neoclassical) theory contains the assurance that the capitalist economy provides a mechanism that in the long run counteracts the tendency of the demand for the products of DI to peter out. As one might expect, this is the price mechanism, which brings about, in the circumstances described above, a falling rate of profit (or interest) and thereby a simultaneous check on accumulation and spur to consumption. The causal chain is simple: the fall of the profit rate would lower capital's share of national income, i.e. it would transfer income from capital to labor. Thus, the demand gap created by the sharp waning of DI's expansion demand would be made up by the increase in consumption demand, which would of course mean an expansion in the demand for the output of DII. Moreover, an immediate expansion of DII at the expense of DI in order to assure a rapid transition out of the stationary state would be entirely feasible given the adaptability of certain key industries in DI to new market conditions resulting from the newly-expanded purchasing power of the working class. The construction of new factories could, for example, yield to the construction of new homes.

The theoretical elegance of this scenario is impressive -almost inspirational- but, alas for illusions, the price mechanism does not work this way. For the above-mentioned transfer in national income from capital to labor is supposed to happen when industrialization comes to an end by virtue of its having been accomplished. But from the capitalists' perspective, it is as if nothing counts as industrialization coming to an end. New industries, for example, can create a situation functionally equivalent to industrialization. "Accumulate, accumulate, that is Moses and the prophets."

We have at this point arrived at a picture of a developed capitalist economy which is in a state of permanent industrialization. Excess capacity prevails and working-class income is stagnant or declining. Interestingly, this has in fact been the state of both the U.S. and the global economy since 1973. According to the foregoing analysis, this reflects the fact that the U.S. and global economies are now instances not merely of the exercise of the law of the tendency of mature capitalism to stagnate, but of its realization. To put it differently: these economies are now in their natural state.

But important questions immediately arise. Why are these economies in their natural state now? And if there is a structurally generated tendency for capitalist economies to stagnate, how shall we account for the historically unprecedented growth rates of the Golden Age? I have barely sketched an outline of a response to these challenges above: if there is indeed a tendency for capitalism to stagnate, then there must have been in operation during the Golden Age what I called "counteracting forces and tendencies" which had spent themselves by the mid-1970s. In the absence of new offsetting forces, the tendency to stagnate has, as we should expect, re-asserted itself. These claims require further elaboration, and it is to this task that I now turn.

SECULAR STAGNATION AND TRANSFORMATIONAL GROWTH

In order to account for the actual pattern of capitalist growth in the context of stagnation theory, we must reflect on the kind of growth required by capitalist economic arrangements. Mainstream theory does not distinguish between kinds of growth if and when it addresses the specific requirements of capitalist growth at all. This is, I believe, a serious error. I will begin by introducing the notion of transformational growth, which transforms the entire way of life of society and absorbs exceptionally large amounts of the investible surplus. My point shall be that a capitalist economy cannot sustain growth merely by producing more and more different types of widgets, in the absence of pervasive structural change. Growth sustained in the latter manner is transformational growth.

We are forced to introduce the concept of transformational growth for reasons related to my earlier discussion of the structural features of mature capitalism which generates a chronic tendency to stagnation. I will now embellish this analysis. It should be clear that capitalism cannot grow in the way in which a balloon grows: its growth cannot leave its proportions intact, i.e. such that there are no new products and no new processes of production. This is to say that a capitalist economy either undergoes transformational growth or it stagnates. The argument is as follows.

Investment expands productive capacity, which in turn requires that demand increase at the same rate as potential production. Without the required rate of demand growth, underutilization/excess capacity will discourage further investment or capital accumulation and the result will of course be stagnation. Let us not address this issue in the manner of the neoclassical economist, who seems to assume that both supply and demand curves can be counted on to perennially shift to the right (absent, of course, undue government interference). But this quaint assumption is belied by the enormous literature on the development and indispensability to capitalism of the marketing and advertising industries, which we might view as massive efforts to counteract Keynes's declining marginal propensity to consume by deliberately creating among the consuming masses a full panoply of "manufactured" consumption desires. These considerations point to the need constantly to exogenously stimulate consumption demand in order to narrow the demand gap generated by the tendency to overaccumulation. But they do not yet establish the need to generate a broad, nation-wide pattern of demand required by structural change and transformational growth.

What is needed at this point are concrete examples of the generators of transformational growth, and of exactly how these generators accomplish one of the fundamental features of transformational growth, the mobilization and coordination of the economic resources of the entire country into a grand national project which stimulates demand not merely for this and that consumption good, but for crucial commodities and institutions such as oil, steel rubber, and other primary products, and communication and transportation facilities. What this requires are what Paul Baran and Paul Sweezy termed, in their influential Monopoly Capital (Monthly Review Press, 1966), "epoch-making innovations". Edward Nell and Robert Heilbroner have characterized these same innovations as "transformative innovations". Let me approach transformative innovations by looking at the tendency to stagnation from yet another perspective, one which focuses on the role of competition as a major force behind the growth of both investment and consumption.

Competition reduces the need for investment by tending to increase both productivity and savings. Let us see how this happens. As a result of competition business is under continuous pressure to cut costs and produce more efficiently. To the extent that business succeeds in these respects, productive potential is increased. At the same time, competition also requires business to hold down wages and salaries and to pay out dividend and profit income relatively sparingly. Together, these pressures hold back both worker and capitalist consumption. The result is a tendency for productive capacity to expand faster than consumption. This means that there is no reason for investment to grow, for capital to achieve the required rate of accumulation, unless there are major pressures transforming the way people live. In the absence of such pressures, we may expect stagnation.

There are two dimensions of transformative innovations which are in fact two aspects of the same phenomenon. One dimension is solely technological, and the other points to changes in a population's entire way of life. Neither of these is part of a process of steady, balloon-like growth, nor is either automatically, or normally, generated by the fundamental capitalist dynamics identified by the mainstream textbooks. For this reason I have called the stimulus imparted by these innovations 'exogenous'. Let us look first at the technological dimension of transformative innovation.

This can be identified, after the owl of Minerva has spread its wings, by reflecting on some of the requirements of ideal-typical capitalism. Neoliberals correctly remind us that the bottom line is of course "freedom", primarily the freedom of capital to roam the world seeking markets, sources of cheap labor and investment opportunities. Microecenomic textbooks in fact tend to assume the perfect mobility of both capital and labor.

Let us focus on sources of power, which became especially important after the industrial revolution. Technological development resulted in the virtually total replacement of human and animal muscle power by inanimate sources of power, mainly water and steam. But reliance on water as a source of power places extreme limits on the mobility of capital, and hence on the possibilities of capitalist growth. Water power is site-specific, and the number of rivers and streams is limited. Moreover, the water had to be fast-running and productive facilities had to be located as far downstream as possible. And of course water power is only seasonally available. These restraints alone place an intolerable obstacle to the free and ongoing accumulation of capital. Here we find an overwhelming incentive to switch from water to steam power. This constitutes a huge stimulus to the accumulation of capital on a national scale.

Capitalism requires sources of power that are independent of nature and can be applied constantly wherever they are needed. And these are precisely what steam power made possible. It was now possible to set up productive facilities virtually anywhere; a major fetter to the accumulation of capital was removed. The universal mobility required by capital was now much more fully realized. At this point I want to emphasize that this technological /economic transformation was necessarily accompanied by profound social and cultural changes. For the steam engine's reduction of the seasonality of water power made possible a feature of work that is increasingly common on a global scale: the emergence of modern year-round work habits. With this change comes a dramatic transformation of our notions (and practices) of work and leisure, with all the consequences these have for the felt experience of everyday life. That is an instance of the second dimension of transformative innovation, i.e. its introduction of dramatic cultural changes, changes in the way populations live.

Much the same can be said for the subsequent shift to electrical power, which makes possible trolley cars, refrigerators (as opposed to what used to be called, in the U.S., "ice boxes"), ranges, toasters, radios, washing machines, fans, et al.

The railroad too is a transformative innovation par excellence. Consider the spectacular effects of railroad expansion: internal transport costs are sharply reduced; both new products and new geographical areas are brought into commercial markets; it is now possible to deliver exports to port with unprecedented efficiency, thereby encouraging the extensive development of the export sector; and impetus is provided to the development of the coal, iron and engineering industries. As with the steam engine, these technological and economic benefits wee necessarily accompanied by profound social and cultural changes. The railroads changed the way of life of the people by binding them as never before. The possibility now existed for mass production, mass consumption and indeed mass culture.

And of course the establishment of a national rail network absorbed massive amounts of investible capital, thereby spurring sustainable growth and offsetting the realization of the economic law that capitalist economies tend to stagnate. Apropos: in the latter third of the nineteenth century, railroad investment in the U.S. amounted to more than all investment in manufacturing industries.

And who can doubt that the transformative effects of the introduction of the automobile were epoch-making? The expansion of the automobile industry was the single most important force in the economic expansion of the 1920s. Car production increased threefold during this decade. (The automobile industry produced 12.7% of all manufactured output, employed 7.1% of all manufacturing workers, and paid 8.7% of all industrial wages.) Immediately after World War II the auto industry continued what was to be its breakneck expansion, and the possibilities created thereby constituted what was perhaps the most extensive transformation of the country's way of life in its history.

Consider the stimulus to capital accumulation and employment constituted by the following, each and all a consequence of the increasing automobilization of American society and culture: the migration of the population from the central city to the suburbs and exurbs (first made possible by the streetcar, before the major streetcar operations were bough and then quickly dismantled by the auto companies); the need for surfaced roads, road construction and maintenance, highway construction and maintenance (which had already accounted for 2% of GDP in 1929); the suburbanization of America, with the attendant construction of housing, schools, hospitals, workplaces, and more; the growth of shopping malls; the expansion of the credit industry; the spread of hotels and motels; and of course the growth of the tourism/travel industry. Never before had any population's way of living been transformed so profoundly in so short a period of time. And of course no one has failed to recognize that Americans' main symbol of their most precious possession, their personal freedom/liberty, is their ability to drive, solo, cars that have increasingly come to resemble tanks. Americans' liberty, embodied in the automobile, has become, literally, a commodity.

The long-term growth of the U.S. economy cannot be adequately explained or described without reference to these transformative innovations. None of these are required by the models of capital accumulation found in neoclassical, Keynesian or Marxian growth theory. After the civil war, growth in the last third of the nineteenth century was spurred primarily by the railroads. This stimulus fizzled, as railroad expansion began to slow down, around 1907, when, in spite of extensive electrification of urban (and even some rural) areas, the U.S. economy began a stretch of slow growth, which lasted until the outbreak of World War I. After the end of the War, the economy experienced a brief slump, which was followed by a period of fairly sustained expansion in the 1920s. The latter, as we have seen, was spurred mainly by the growth of the automobile industry. But the rate of growth of the automobile industry slowed down after 1926, and with it the rate of growth of almost all other manufacturing industries. And wages and employment had not risen as rapidly as production, productivity or profits.

In fact, the economic situation in the U.S. at the end of the 1920s bore a remarkable resemblance to the current economic situation in America. After 1926 overcapacity emerged in many key industries, the most significant of these being automobiles, textiles, and residential construction. Contractionary forces are cumulative: excess capacity caused business confidence to decline, with resulting cutbacks in spending on productive capacity in the consumer durables and capital goods industries. The economy was intensely unsound at the end of the 1920s, and the indications at the time were clear. Consumer demand was held down by a steadily growing inequality of income. Thus, an increasing percentage of total purchases were financed by credit in order to foster purchases of consumer durables. About seventy-five percent of all cars were sold on credit. Accordingly, both home mortgages and installment debt grew rapidly. This was the extension of a trend that had begun as early as 1922, when total personal debt began rising faster than disposable income. Thus, underconsumption and traces of excess capacity, key indicators of stagnationist forces, were in effect from the very beginning of the "roaring '20s". These tendencies became increasingly foregrounded over the course of the decade.

Excess capacity in key manufacturing industries was displacing workers from capital-intensive, technologically advanced sectors to industries relatively devoid of technological advance, i.e. service industries such as trade, finance and government. With capital unable to find sufficiently profitable investment opportunities in high-productivity industries, rampant speculative activity ensued, fostered by the growing concentration of income and therefore savings during the decade. More than two thirds of all personal savings was held by slightly over two percent of all families. The wanton optimism of the 1920s led those with substantial savings to want to get richer quickly, and with little effort. The stock market bubble that materialized at the end of the decade seemed to justify the expectations that fortunes could be made overnight in real estate and the stock market. When investors acted on these expectations, the existing bubble became bigger and hence more fragile. To those familiar with the current state of the U.S. economy, the present situation presents itself as history repeating itself -contra Marx- yet again as farce.

FROM GREAT DEPRESSION TO GOLDEN AGE TO NEOLIBERALISM

The mounting instabilities of the economy of the 1920s led to a Depression that was unresponsive to the Roosevelt administration's elevenfold increase in government spending. When U.S. entry into World War II finally brought about a resumption of growth, there was nonetheless an abiding fear among economists that once War spending ceased, the forces and tendencies that had generated the Depression might reassert themselves and exceptionally slow growth could resume. Instead, much to the surprise of many economists, American capitalism began the most sustained period of expansion in its entire history. The period from 1947 to 1973 has come to be called "The Golden Age", and appears, on the face of it, to be a fatal anomaly with respect to secular stagnation theory. After all, if the causes of the Great Depression were structural, and the exogenous stimulus provided by the War was what produced a resumption of growth, how was it possible that the economy, in the absence of powerful exogenous stimulus, exhibited an historically unprecedented period of long-term growth?

I have suggested that sustained national (as opposed to intra-national regional) growth has been engendered by the emergence of transformative innovations, and it is this kind of consideration that I believe offers the most plausible explanation both of Golden-Age expansion and of the petering out of this growth period and the resumption of (global) stagnation. Five stimuli to long-term growth were set in motion after the War, and these were for the most part exogenous in the sense indicated, and essentially limited. I will construe these stimuli as forces counteracting the tendency to stagnation. Once most of these stimuli had spent their potential, stagnationist tendencies re-asserted themselves, and overinvestment became evident once again. With profitable industrial investment opportunities in short supply, the economic surplus was invested instead in what became a vast proliferation of financial instruments. When the bubble created by this process finally burst, it was replaced with a housing bubble. Indeed a variety of bubbles, in financial assets, in housing, in credit, and a substantially overvalued dollar now threaten an historically unparalleled reassertion of the tendency to stagnation. But let us look first at the counteracting forces.

After the War, and as a result of wartime rationing, Americans had accumulated a very large fund of savings, and the time had come when these could finally be spent. This accounted for an immediate surge of consumption spending which temporarily averted the onset of recession. But the effectiveness of this source of spending was soon spent. What truly impelled the sustained growth of the Golden Age was 1) the resumption of a vast expansion of the automobile industry, and with it the stimulation of the broad range of investment and employment opportunities discussed above in connection with automobilization; 2) large-scale economic aid to Europe, which stimulated export demand; 3) a nationwide process of suburbanization, which, in tandem with the expansion of auto production, expanded significantly the demand for the output of every other major industry; 4) the emergence of what president Eisenhower christened the "military-industrial" complex, which provided additional stimulus to the industries most vulnerable to economic instability, the industries of DI, the capital goods sector; and finally 5) the steady and growing expansion of business and especially consumer credit, which in recent years has assumed elephantine proportions.

Three of these factors bear the two most important features of epoch-making innovations. The expansion of the auto industry, suburbanization, and the ever-increasing expansion and extension of credit all absorb massive amounts of investible surplus, and transform the mode of life of the entire population. In so doing they impart a massive push to the macro-growth process. The first two of these have their initial direct effect on investment. The third factor, the growing importance of credit, affects both investment and consumption, but the long-term trend of the credit industry in the U.S., evident now in hindsight, is much more significant in relation to consumption. There is now in the States a credit bubble of menacing proportions, with consumers now in debt to the tune of about107% of disposable income. The Marshall Plan (number 2 above) affected mainly and directly investment and employment, with boosts to consumption following thereupon. By the mid- to late-1970s, the employment-generating capacity of the military had declined. Washington determined, in the light of the defeat in Vietnam, that hi-tech warfare, which is of course technology- rather than labor-intensive, must replace traditional forms of subversion and aggression, in order to render less likely a repeat of the "Vietnam Syndrome."

It is worth mentioning that the military-industrial complex and the vast extension of consumer credit were what constituted what Joan Robinson called "bastard Keynesianism" in the United States. Recall that Keynes had insisted that fiscal and monetary policy were necessary but not sufficient conditions for avoiding stagnation. The tendency to stagnation could be offset for the long run only if some key industries were nationalized, and income redistributed. Nationalization would allow the State to offset lagging demand by providing cheap inputs to the private sector, thereby enabling lower prices. And redistributing income would transfer liquidity from those who had more than they could either consume or invest to those whose consumption demand was severely constrained.

American policymakers saw it as their challenge to reap the effects of nationalization and redistribution without actually nationalizing industries or redistributing income. The solution was ingenious: the military-industrial complex would be the functional equivalent of state-owned industries, and would, as noted above, stimulate the demand for the output of those very firms that produced capital goods. And the extension of consumer credit would allow working people to mortgage future years' incomes and spend more without a corresponding increase in either their private or their social wage.

As mentioned earlier, these forces counteracting the tendency to stagnation were all inherently limited and temporary. By the late 1960s, the automobile industry had achieved maturity, suburbanization had been accomplished, and aid to Europe had not only long ended, but had apparently created for America the economic equivalent of Frankenstein's monster. Europe and Japan were now formidable threats to U.S. economic hegemony. (Germany, for example, has overtaken the U.S. as an exporter of capital goods.) These three colossal absorbers of surplus were now no longer in operation. In the mid-1960s social spending had overtaken military spending as the larger share of government spending. And credit had begun to function as a supplement to declining real income, rather than a further addition to growing income.

These combined developments rendered the post-War counters to the realization of the tendency to stagnation obsolete. The result was the onset of stagnation not only in the U.S. but also worldwide. In America there has been overcapacity in autos, steel, shipbuilding and petrochemicals since the mid- to late-1970s.

This general picture is widely reflected in the business press. Business Week noted that "..supply outpaces demand everywhere, sending prices lower, eroding corporate profits and increasing layoffs" (Jan. 25, 1999, p. 118). The former chairman of General Electric claimed that "..there is excess capacity in almost every industry" (The New York Times, Nov. 16, 1997, p. 3). The Wall Street Journal noted that "..from cashmere to blue jeans, silver jewelry to aluminum cans, the world is in oversupply" (Nov. 30, 1998, p. A17). And The Economist fretted that " the gap between sales and capacity is "at its widest since the 1930s" (Feb. 20, 1999, p. 15). At this time excess capacity in steel is exceeding twenty percent, in autos it has fluctuated around 30%. And these figures look good in comparison to unused capacity numbers in the "industries of the future" of the "New Economy", semiconductors and telecommunications. Not long ago, ninety-seven percent of fibre optic capacity was idle.

MAINSTREAM ECONOMICS AND STAGNATION THEORY

Let us begin with the indisputable fact that the regime of neoliberalism has brought with it a substantial decline in economic growth. The most widely cited study on this issue, produced for the IECD by Angus Maddison, shows that the annual rate of growth of real global GDP fell from 4.9% in 1950-1973 to 3 % in 1973-1998, a drop of 39 %. Theoretical commitments can guide perception: neoliberal economists either denied or ignored the decline in global growth because of their reliance on Say's Law, that it is not possible for total demand to fall below full-capacity supply over the long run. In my earlier remarks I offered an explanation of sluggish growth rates since 1973. Many orthodox economics have done something similar: they have offered explanations of the initial rise in excess capacity. But what has not been explained is why global supply did not eventually adjust itself to the slower rate of demand growth, with the result that in the mid-1970s the global economy would enter a period of sluggish expansion. And it is worth mentioning that even Keynesian macro-theory is inadequate in this regard. It assumes that slow growth in aggregate demand will result in a proportionate decline in the growth of aggregate supply through its effect upon investment and therefore productivity.

An adequate explanation of the sustained character of excess capacity can be constructed from insights from Schumpeter, Marx and the contemporary economist James Crotty. The analysis that follows should be understood within the framework of the version of secular stagnation theory sketched above.

Before the shift to neoliberal policies by Jimmy Carter, Reagan and Thatcher, the global economy was already subject to downward pressures on demand growth resulting from two oil price shocks and the restrictive macro policy imposed in response to oil-price induced inflation. These impediments to demand growth were exacerbated by neoliberal policies. In combination, these forces led to a sharp rise in excess capacity in globally competing industries. At the same time competitive pressures were further intensified by the reduction of the market power of national oligopolies caused by the removal of protectionist barriers to the free movement of goods and money across national boundaries. Accordingly, competitive pressures between nations rose dramatically. In this context, normal stagnationist tendencies operated to further constrain global demand growth and further reproduce industrial capacity faster than either neoclassical or Keynesian theory could comprehend.

The Achilles Heel of neoclassical theory with respect to its inability to account for the persistence of overcapacity during the neoliberal period is its account of competition. So-called "perfect competition" is alleged to lead to maximum efficiency and the elimination of excess capacity. This claim appears inconsistent with the history of real-world, pre- and post-oligopolistic competition. Textbook-like competition has led to periodic market gluts or overproduction crises, price wars, plummeting profits, unbearable debt burdens and violent labor relations. Neoclassical theory banishes these demons with the aid of two assumptions which appear designed explicitly to make them impossible. The first assumption claims that production cost per unit rises rapidly as output increases, and the second that exit from low-profit industries is free or costless. If these assumptions were indeed true, then pure competition could not be shown to have stagnation- or depression-inducing effects. But these assumptions are, I shall suggest, false.

I will begin with the least plausible of these two assumptions. It states that there is free or costless exit from low-profit industries. But productive assets are typically immobile or irreversible, i.e., they are not liquid, and this forces a sizeable loss in the value of a firm's capital should it choose to leave an unprofitable industry. Whether they are sold on a second-hand market or reallocated to a different industry, productive assets will lose substantial value. Capital flowing out of the aerospace industry has been found to sell for one third of its replacement cost. Insolvent telecom firms in the U.S. have sold their assets for 20 cents on the dollar. And isn't this what one would expect? For it is usually poor profit prospects and/or great excess capacity that heighten a firm's incentive to leave an industry. But it is precisely those circumstances which deeply depress the price of industry-specific assets on the second-hand market, since the supply of these assets grows even as the demand for them has collapsed.

Before I turn to the slightly more plausible (yet still false) assumption -that unit production cost rises dramatically as output increases- I will outline the corollary of neoclassical theory itself which neoclassical economists seek to evade by introducing this assumption. The theory tells us that pure competition will force price down until it covers marginal cost. Now if unit production cost remained constant irrespective of the output level, then marginal production cost and average production cost per unit would be equal. When perfect competition forces price to equal marginal cost, total revenue will be equal to total production cost. But in this case there will be no revenue left over either to pay the "fixed" cost of maintaining capital stock in the face of depreciation or obsolescence, or to pay interest and/or dividends to investors. Thus, perfect competition is seen to cause the representative firm to suffer, in each production period, a loss that is equal to fixed costs. Keeping in mind that most important global industries have huge fixed costs, no industry could long survive the consequences of intense competition.

We seem to have found a tendency to stagnation or complete system breakdown where we would least expect to find it - in neoclassical theory itself. But the theory claims to have a response to this embarrassment. It simply denies the claim that appears to entail the undesired consequence, namely the claim that unit production cost remains constant no matter what the output level. Armed now with the (false) assumption that unit production cost rises rapidly as production increases, the conclusion is drawn that marginal cost and price are greater than average unit production cost. Thus, in equilibrium, the gap between price and average production cost is sufficiently large to cover all fixed costs. Let competition be as fierce as you wish, the typical firm will not lose money. Voila!

I have claimed that each of the rescuing assumptions discussed above is false. What would realistic assumptions about marginal cost and the reversibility of invested capital look like? To answer this question we must recognize the distinctive character of the dominant industries of global trade and investment. These industries include steel, autos, aircraft, shipbuilding, petrochemicals, consumer durables, electronics, semiconductors and banking. Studies of this type of industry suggest that marginal cost does not typically rise with output, with the rare exception of cases when the industry is producing near full capacity output. Marginal cost behaves as we would expect in cases of economies of scale: it remains constant or declines as capacity utilization rises. It follows that if free competition forces price to equal marginal cost in these industries, we should count on an ensuing wave of bankruptcies. Here again we see that neoclassical theory, corrected for unrealistic assumptions, seems to commit us to conceptualize mature capitalism as subject to the law of an inherent tendency to stagnation or worse.

The issue I am focusing on here turns on the dynamics of unrestricted competition among oligopolies in the context of economies of scale. The importance of economies of scale underscores the crucial similarity of all the dominant industries, including the new information-technology and telecommunications (ITC) industries. I stress this point because influential neoclassical economists have wanted to claim a significant difference, with respect to overcapacity problems, between the ITC industries and the other dominant industries. For purposes of explaining the persistence of excess capacity under neoliberalism, we want to remember that as scale economies grow, marginal costs fall as fixed costs per unit rise. Thus, the greater the economies of scale, the more destructive becomes the marginal cost pricing required by intense competition. With this in mind, we can more easily see that 1) these dynamics in especially conspicuous operation in the ITC industries, and 2) that such differences as there are between ITC and the other dominant oligopolies are insignificant for the analysis of secular stagnation theory, and of capitalist growth in general.

The key issue right now, recall, is the highly destructive consequences of the tendency of free competition among dominant industries to force price to equal marginal cost. That this is the case is easier to see in the ITC sector than in the other dominant industries. This is because in ITC marginal cost is often close to zero. Producing another copy of software or adding another customer to eBay is virtually costless. This has led many mainstream economists to argue that ITC industries are exempt from the laws of the neoclassical theory of perfect competition. Since ITC firms have marginal costs much lower than their large fixed costs, the argument goes, the possession of at least temporary monopoly power is the only guarantee of an incentive to produce anything at all. Without monopoly pricing power prices will be competed down to marginal cost and fixed costs will be unable to be covered. Thus, the motor of the "new economy" is said to be the constant pursuit of monopoly power. But, contrary to the neoclassical claim, none of this distinguishes significantly between ITC and other key industries. The drive to monopoly power is characteristic of all large corporations in the present age.

As Paul Sweezy argued in his Marshall Lectures, the typical firm in an oligopolized industry strives to be a monopolist. Each firm does this individually, and they all do it collectively. Individual firms seek monopoly status through the sales effort, where the firm's product is put forth as the best in the industry and as different from all the others. Firms within the same industry seek to approach monopoly status by collusion with respect to pricing policy, especially by agreeing to refrain from cutthroat price competition. For reasons developed at length above, therefore, all dominant firms, whether old- or new-economy operations, will tend to achieve monopoly status and to be chronically saddled with excess capacity.

A SCANDALOUSLY BRIEF LOOK AT SLOW-GROWTH CAPITALISM

We are in the midst of another unparalleled period of historical capitalism. Since the onset of stagnation, the median wage in the States has not changed at all for the vast majority of wage workers. Over the past six quarters the gowth of wage income has been negative. A brief sketch of the state of the U.S. economy toward the end of last year highlights features whose most plausible explanation may lie in the fact of secular stagnation. If stagnation theory is accurate, what follows is precisely what we would expect to find. The current state of the U.S. and the global economy is best understood, I believe, against the background too briefly elaborated above. Here is a picture of the U.S. economy today. The key to a healthy economy is job- and income-creating investment in capital goods, which in turn generates a virtuous cycle of further growth in investment, jobs and income. Ominously, the investment, growth, employment and income pictures are unprecedentedly dismal.

Compared to cyclical recoveries between 1949 and 1973, recoveries during the neoliberal period have been weak. Indeed, one or two of the post-1973 upturns has been weaker than some downturns during the Golden Age. Since the stock market collapse of four years ago, the situation has worsened. Growth rates since 2000 have been half their previous average. Even this weak performance required historically unprecedented fiscal and monetary stimulus: 13 rate cuts, three tax cuts, massive government deficits and record growth in money and credit.

Official figures mask the economy's most serious problems. Growth figures are annualized by U.S. statisticians. Thus, the much-touted 7.1% growth rate in the third quarter of 2003 was the one that would emerge after twelve months if the current trend were to continue. The same growth rate would have been reported in the eurozone as 1.8%. This is an uncommonly weak performance.

Investment data are equally misleading. Since the mid-1990s the Bureau of Economic Analysis (BEA) has adjusted upward actual business dollar outlays on computers and related equipment to take into account quality improvements (faster processors, bigger hard drives, more memory). BEA calls this "hedonic adjustment." Accordingly, the BEA estimates that business high-tech investment quadrupled between 1996 and 2002, from $70.9 to $283.7. But in actual dollars spent, the increase was only from $70.9 billion to $74.2 billion, very low by historic standards. The high-tech boom was both greatly exaggerated and misleading. After all, neither profits nor wages are taken in "hedonically adjusted" dollars.

The difference between real and hedonic outlays explains what would otherwise be a paradoxical feature of the years 2000-2003: government was reporting big increases in high-tech investment, while manufacturers were bemoaning declining sales.

Hedonic pricing has accounted for a steadily rising percentage of all reported capital investment. But if we look at actual dollars spent, we find that since 1998 the growth rate of business fixed investment has actually been declining. Real capital investment has in fact not been this weak since the Great Depression.

The fudging of investment figures also obscures the sorry state of the jobs market. The Commerce Department's figures on nonresidential investment for the third and fourth quarters of 2003 reported increases of, respectively, 12.8 and 9.6%. A closer look reveals that the "adjusted" hi-tech sector is the only bright spot, with production and capacity rising, respectively, 24.6% and 11.1% over the past year. But hi-tech is not where significant jobs increases are found. Employment in hi-tech has declined steadily through the so-called "recovery" since its 2001 peak.

In non-hi-tech manufacturing, where investment figures are not adjusted, production from January 2003 to January 2004 rose only 0.9%, while capacity actually declined -0.2%. This represents a record nineteen-straight-month decline in mainline manufacturing capacity. Since it is mainline manufacturing which employs almost 95% of all manufacturing workers, it comes as no surprise that for the first time since the Great Depression the economy has gone more than three years without creating any jobs.

The jobs crisis is even worse than it appears. Here again statistical sleight-of-hand, this time by the Bureau of Labor Statistics (BLS), obscures economic reality. Based on data gathered employing the "net birth/death adjustment," BLS announced in April, 2004, that the long-awaited jobs recovery had finally arrived. Nonfarm payrolls had allegedly surged by a whopping 308,000 in March, 2004. The birth/death model uses business deaths to "impute" employment from business births. Thus, as more businesses fail, more new jobs are imputed to have materialized through business births. This improbable statistical artefact accounts for about half of the reported 308,000 March, 2004 payroll increase.

The birth/death model is based on statistics covering 1998-2002. This was a period of explosive telecom and dot.com startups, quite unlike today's flat economic landscape. Thus, two thirds of the 947,000 new jobs BLS "imputed" for March-May, 2004, were never actually counted by BLS and never reported by any firm.

BlS's household and establishment surveys tell a more sobering story. March employment by private industry actually fell by 175,000, and the number of self-employed workers declined by 288,000. Without the simultaneous increase of 439,000 government jobs, the March job announcement would have been a calamity. And both average weekly hours and total hours worked declined markedly, even as (according to the dubious birth/death findings) the work force increased. This is the first time in U.S. history that net job growth has been negative 26 months into a recovery.

The wage and salary picture has also set grim records. During the current recovery, wage and salary growth has actually been negative, at -0.6%, in contrast to the average increase of 7.2% characteristic of this point into each of the other eight post-War recoveries. In fact, median family income in the post-War period exhibits an ominous trend. From 1947 to 1967, real median family income rose by 75%. But since 1967, it has grown by only 30%.

Labor's losses have been capital's gain: since the peak of the last recovery, in the first quarter of 2001, corporate profits have risen 62.2%, compared to the average of 13.9% at the same point in the last eight recoveries. Never in American history has any recorded recovery had such a lopsided balance in the distribution of income gains between labor and capital.

Given the dismal investment, wage/salary and employment pictures, how has it been possible for consumption to have risen to 71% of GDP in the early nineties, from its prior post-War average of 66%? The answer is a growth rate of consumer debt never seen before in America. For the first time ever, in March 2001, overall debt levels (mortgage debt plus consumer debt, mainly credit card debt and car loans) rose above annual disposable income. And from 2001 to 2004 consumer debt rose from 101% to 116% of disposable income. In the first half of 2004, consumer borrowing has been at its highest ever. It has declined slightly in the meantime. So has consumer spending. Should Americans decide to significantly increase their saving and service debts, while lowering correspondingly their consumption expenditures, the global economy could experience a major disruption.

Up until very recently, consumers had stepped up their borrowing to compensate for slowing income growth. Thus, such growth as the U.S. has experienced in recent years has been almost entirely consumption- and debt-driven. More fundamentally, it has been bubble-driven, fueled principally by bubbles in home values and credit.

Since the collapse of stock market/hi-tech bubbles in 2001, the illusory "wealth effect" has been sustained, and consumer spending thereby encouraged, by another bubble, the enormous inflation of house prices. The biggest increase in household debt came from home mortgage debt, especially home mortgage refinancing. With mortgage rates low and home prices rising, households' home equity ballooned. Bloated home equity then provided rising collateral to underwrite still more borrowing.

What makes this especially problematic is that over the last ten years, the average family has suffered under large increases in health premiums, housing costs, tuition fees and child care costs. As a result, households' and individuals' margin of protection against insolvency has dramatically declined. Filings for personal bankruptcy are approaching a record high.

There are indications that these weaknesses and imbalances in the economy are reaching a critical mass. The mortgage refi boom has fizzled, and consumer spending is beginning to decline. Two years ago the Fed's quarterly Beige Book reported a disturbing shift in the composition of credit spending: more and more families are using their credit cards to finance spending on essentials, such as food and energy.

It is no exaggeration to say that both the U.S. economy and the global economy are hugely dependent on the American consumer's increasing willingness to spend more than (s)he makes. (Imported goods have been a rising proportion of all goods purchased here.) Thus, a decline in U.S. consumer spending portends further declines in investment, jobs and income. From January to July of 2004, consumer spending rose at an annual rate of 2.8%, down from 3.3% in 2003 and 3.1 % in 2002. For perspective, during the boom years 1999-2000, growth rates were 5.1% and 4.7%.

Spending on consumer durables is the most significant indicator of healthy growth, and the drastically lower spending in this area is cause for alarm: spending for consumer durables was down to $23.5 billion in the first seven months of this year, in contrast to $71 billion on 2003 and $58 billion in 2002.

Should consumer spending continue to decline, the economy faces the genuine likelihood of a severe recession. Of course not a single American politician addresses this issue.

What is required is a shift from bubble-, debt-, and consumption-driven growth to investment- and income-driven growth. This in turn necessitates a decline in Americas principal export, jobs. Domestic job growth, a higher minimum wage, tax cuts aimed predominantly at low- and middle-income families, a sharp reduction in defense spending and a redirection of these funds to long-neglected and pressing social needs such as health care reform, the provision of universal pre-school, and across-the-board repair and upgrading of America's deteriorated infrastructure of roads, highways,tunnels and bridges, all these should be at the forefront of a Democratic administration's agenda. The restoration of infrastructure is especially labor intensive, and would generate an enormous number of productive jobs. And as a national project spearheaded by government initiative, government would emerge as a major employer.

All this si entirely incompatible with the overwhelming neoliberal bent of even the most "liberal" political leaders. It was after all Bill Clinton who urinated on the grave of Franklin Roosevelt when he proclaimed "the end of welfare as we know it".

As unfashionable as it is to suggest such a thing at a conference of economists, the only hope for the world's majority seems to be the revival of the kinds of mass movements witnessed here in May of 1968, and throughout the world during the 1960s. And time may be short.

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Alan Nasser is Professor emeritus of Political Economy and Philosophy at The Evergreen State College. His book, The “New Normal”: Persistent Austerity, Declining Democracy and the Globalization of Resistance will be published by Pluto Press in 2013. If you would like to be notified when the book is released, please send a request to nassera@evergreen.edu

Thomas Palley » Blog Archive » Explaining Stagnation Why it Matters

John Bellamy Foster and Fred Magdoff clearly identify stagnation in their 2009 book The Great Financial Crisis: Causes and Consequences (HERE). They conclude with a section titled “Back to the real economy: the stagnation problem” and they write:

“It was the reality of economic stagnation beginning in the 1970s, as heterodox economists Ricardo Belliofiore and Joseph Halevi have recently emphasized, that led to the emergence of “the new financialized capitalist regime,” a kind of “paradoxical financial Keynesianiasm” whereby demand in the economy was stimulated primarily “thanks to asset-bubbles” (Foster and Magdoff, p.129).”

My own 2009 New America Foundation report, “America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession”, concluded (HERE):

“The bottom line is macroeconomic failure rooted in America’s flawed economic paradigm is the ultimate cause of the financial crisis and Great Recession…. Now, there is a grave danger that policymakers only focus on financial market reform and ignore reform of America’s flawed economic paradigm. In that event, though the economy may stabilize, it will likely be unable to escape the pull of economic stagnation. That is because stagnation is the logical next stage of the existing paradigm.”

That report became a core chapter in my 2012 book, From Financial Crisis to Stagnation, the blurb for which reads (HERE):

“The U.S. economy today is confronted with the prospect of extended stagnation. This book explores why…. Financial deregulation and the house price bubble kept the economy going by making ever more credit available. As the economy cannibalized itself by undercutting income distribution and accumulating debt, it needed larger speculative bubbles to grow. That process ended when the housing bubble burst. The earlier post–World War II economic model based on rising middle-class incomes has been dismantled, while the new neoliberal model has imploded. Absent a change of policy paradigm, the logical next step is stagnation. The political challenge we face now is how to achieve paradigm change.”

The big analytical difference between Foster and Magdoff and myself is that they see stagnation as inherent to capitalism whereas I see it as the product of neoliberal economic policy. Foster and Magdoff partake of the Baran-Sweezy tradition that recommends deeper socialist transformation. I use a structural Keynesian framework that recommends reconstructing the income and demand generation mechanism via policies that include rebuilding worker bargaining power, reforming globalization, and reining in corporations and financial markets.

Larry Summers’ story of serial bubbles delaying stagnation has substantial similarities with both accounts but he avoids blaming either capitalism or neoliberalism. That is hardly surprising as Summers has been a chief architect of the neoliberal system and remains committed to it, though he now wants to soften its impact. Instead, he appeals to the black box of “secular stagnation” as ultimate cause and suggests fiscal policies that would ameliorate the demand shortage problem. However, those policies would not remedy the root cause of stagnation as they leave the economic architecture unchanged.

Though Summers and Krugman are relative late-comers to the stagnation hypothesis, they have still done a great public service by drawing attention to it. Now that stagnation has been identified, the real debate can begin.

The questions are what caused stagnation and what must be done to restore shared prosperity? There is no guarantee we will answer those questions correctly (my prior is mainstream economists will continue their track record of getting it wrong). But it is absolutely certain we will not get the right answer if we do not ask the right question. So thank you Larry Summers and Paul Krugman for putting stagnation on the table. Let the debate begin.

This entry was posted on Monday, February 24th, 2014 at 12:53 pm and is filed under Economics, U.S. Policy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Summers makes the idea of secular stagnation mainstream

Larry Summers (“Why Stagnation May Prove To Be The New Normal,” The Financial Times, December 15, 2013)  suggested the current "lack of demand" is not anomaly but a feature of the current sociao-economic system.  He suggested that we have been in the throes of stagnation for a long while, but that has been obscured by years of serial asset price bubbles. His article produced great public debate and marked the point when the idea became mainstream. The debate began with Summers’ speech to the IMF’s Fourteenth Annual Research Conference in Honor of Stanley Fisher. Summers noted that the panic of 2008 was “an event that in the fall of 2008 and winter of 2009 … appeared, by most of the statistics—GDP, industrial production, employment, world trade, the stock market—worse than the fall of 1929 and the winter of 1930. …”

Tha means the major defeat for “stabilization policies” that were supposed to smooth the capitalist industrial cycle and abolish panics. And the problem preceeds the 2008 panic itself.

The highly misleading unemployment rate calculated by the U.S. Department of Labor notwithstanding, there has been a massive growth in long-term unemployment in the U.S. in the wake of the crisis, as shown by the declining percentage of the U.S. population actually working.

The current situation also refute the key tenet of neoclassical economy (which is pseudo-religious doctrine, so that only increase fanatic devotion of its well-paid adherents). Neoclassical economists insisted that since a “free market economy” naturally tends toward an equilibrium with full employment of both workers and machines, the economy should should quickly return to “full employment” after a recession. This is not the case. See also Secular Stagnation Lawrence H. Summers

There were several uncessful attempts to explaint his situation from neoclassical positions. In Secular Stagnation, Coalmines, Bubbles, and Larry Summers - NYTimes.com Paul Krugman  emphasized the liquidity trap – zero lower bound to interest rates which supposedly prevents spending from reaching a level sufficient for full employment.

Larry’s formulation of our current economic situation is the same as my own. Although he doesn’t use the words “liquidity trap”, he works from the understanding that we are an economy in which monetary policy is de facto constrained by the zero lower bound (even if you think central banks could be doing more), and that this corresponds to a situation in which the “natural” rate of interest – the rate at which desired savings and desired investment would be equal at full employment – is negative.

And as he also notes, in this situation the normal rules of economic policy don’t apply. As I like to put it, virtue becomes vice and prudence becomes folly. Saving hurts the economy – it even hurts investment, thanks to the paradox of thrift. Fixating on debt and deficits deepens the depression. And so on down the line.

This is the kind of environment in which Keynes’s hypothetical policy of burying currency in coalmines and letting the private sector dig it up – or my version, which involves faking a threat from nonexistent space aliens – becomes a good thing; spending is good, and while productive spending is best, unproductive spending is still better than nothing.

Larry also indirectly states an important corollary: this isn’t just true of public spending. Private spending that is wholly or partially wasteful is also a good thing, unless it somehow stores up trouble for the future. That last bit is an important qualification. But suppose that U.S. corporations, which are currently sitting on a huge hoard of cash, were somehow to become convinced that it would be a great idea to fit out all their employees as cyborgs, with Google Glass and smart wristwatches everywhere. And suppose that three years later they realized that there wasn’t really much payoff to all that spending. Nonetheless, the resulting investment boom would have given us several years of much higher employment, with no real waste, since the resources employed would otherwise have been idle.

OK, this is still mostly standard, although a lot of people hate, just hate, this kind of logic – they want economics to be a morality play, and they don’t care how many people have to suffer in the process.

But now comes the radical part of Larry’s presentation: his suggestion that this may not be a temporary state of affairs.

2. An economy that needs bubbles?

We now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the latter part of the 90s expansion; and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate.

So you might be tempted to say that monetary policy has consistently been too loose. After all, haven’t low interest rates been encouraging repeated bubbles?

But as Larry emphasizes, there’s a big problem with the claim that monetary policy has been too loose: where’s the inflation? Where has the overheated economy been visible?

So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? Summers’s answer is that we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn’t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s.

One way to quantify this is, I think, to look at household debt. Here’s the ratio of household debt to GDP since the 50s:

There was a sharp increase in the ratio after World War II, but from a low base, as families moved to the suburbs and all that. Then there were about 25 years of rough stability, from 1960 to around 1985. After that, however, household debt rose rapidly and inexorably, until the crisis struck.

So with all that household borrowing, you might have expected the period 1985-2007 to be one of strong inflationary pressure, high interest rates, or both. In fact, you see neither – this was the era of the Great Moderation, a time of low inflation and generally low interest rates. Without all that increase in household debt, interest rates would presumably have to have been considerably lower – maybe negative. In other words, you can argue that our economy has been trying to get into the liquidity trap for a number of years, and that it only avoided the trap for a while thanks to successive bubbles.

And if that’s how you see things, when looking forward you have to regard the liquidity trap not as an exceptional state of affairs but as the new normal.

3. Secular stagnation?

How did this happen? Larry explicitly invokes the notion of secular stagnation, associated in particular with Alvin Hansen (pdf).  He doesn’t say why this might be happening to us now, but it’s not hard to think of possible reasons.

Back in the day, Hansen stressed demographic factors: he thought slowing population growth would mean low investment demand. Then came the baby boom. But this time around the slowdown is here, and looks real.

Think of it this way: during the period 1960-85, when the U.S. economy seemed able to achieve full employment without bubbles, our labor force grew an average 2.1 percent annually. In part this reflected the maturing of the baby boomers, in part the move of women into the labor force.

This growth made sustaining investment fairly easy: the business of providing Americans with new houses, new offices, and so on easily absorbed a fairly high fraction of GDP.

Now look forward. The Census projects that the population aged 18 to 64 will grow at an annual rate of only 0.2 percent between 2015 and 2025. Unless labor force participation not only stops declining but starts rising rapidly again, this means a slower-growth economy, and thanks to the accelerator effect, lower investment demand.

By the way, in a Samuelson consumption-loan model, the natural rate of interest equals the rate of population growth. Reality is a lot more complicated than that, but I don’t think it’s foolish to guess that the decline in population growth has reduced the natural real rate of interest by something like an equal amount (and to note that Japan’s shrinking working-age population is probably a major factor in its secular stagnation.)

There may be other factors – a Bob Gordonesque decline in innovation, etc.. The point is that it’s not hard to think of reasons why the liquidity trap could be a lot more persistent than anyone currently wants to admit.

4. Destructive virtue

If you take a secular stagnation view seriously, it has some radical implications – and Larry goes there.

Currently, even policymakers who are willing to concede that the liquidity trap makes nonsense of conventional notions of policy prudence are busy preparing for the time when normality returns. This means that they are preoccupied with the idea that they must act now to head off future crises. Yet this crisis isn’t over – and as Larry says, “Most of what would be done under the aegis of preventing a future crisis would be counterproductive.”

He goes on to say that the officially respectable policy agenda involves “doing less with monetary policy than was done before and doing less with fiscal policy than was done before,” even though the economy remains deeply depressed. And he says, a bit fuzzily but bravely all the same, that even improved financial regulation is not necessarily a good thing – that it may discourage irresponsible lending and borrowing at a time when more spending of any kind is good for the economy.

Amazing stuff – and if we really are looking at secular stagnation, he’s right.

Of course, the underlying problem in all of this is simply that real interest rates are too high. But, you say, they’re negative – zero nominal rates minus at least some expected inflation. To which the answer is, so? If the market wants a strongly negative real interest rate, we’ll have persistent problems until we find a way to deliver such a rate.

One way to get there would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. Another way would be to take advantage of the next boom – whether it’s a bubble or driven by expansionary fiscal policy – to push inflation substantially higher, and keep it there. Or maybe, possibly, we could go the Krugman 1998/Abe 2013 route of pushing up inflation through the sheer power of self-fulfilling expectations.

Any such suggestions are, of course, met with outrage. How dare anyone suggest that virtuous individuals, people who are prudent and save for the future, face expropriation? How can you suggest steadily eroding their savings either through inflation or through negative interest rates? It’s tyranny!

But in a liquidity trap saving may be a personal virtue, but it’s a social vice. And in an economy facing secular stagnation, this isn’t just a temporary state of affairs, it’s the norm. Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers.

Oh, and one last point. If we’re going to have persistently negative real interest rates along with at least somewhat positive overall economic growth, the panic over public debt looks even more foolish than people like me have been saying: servicing the debt in the sense of stabilizing the ratio of debt to GDP has no cost, in fact negative cost.

I could go on, but by now I hope you’ve gotten the point. What Larry did at the IMF wasn’t just give an interesting speech. He laid down what amounts to a very radical manifesto. And I very much fear that he may be right.

Supplement 1: Of Flying Cars and the Declining Rate of Profit (reprint)

Of Flying Cars and the Declining Rate of Profit - The Baffler

David Graeber

A secret question hovers over us, a sense of disappointment, a broken promise we were given as children about what our adult world was supposed to be like. I am referring not to the standard false promises that children are always given (about how the world is fair, or how those who work hard shall be rewarded), but to a particular generational promise—given to those who were children in the fifties, sixties, seventies, or eighties—one that was never quite articulated as a promise but rather as a set of assumptions about what our adult world would be like. And since it was never quite promised, now that it has failed to come true, we’re left confused: indignant, but at the same time, embarrassed at our own indignation, ashamed we were ever so silly to believe our elders to begin with.

Where, in short, are the flying cars? Where are the force fields, tractor beams, teleportation pods, antigravity sleds, tricorders, immortality drugs, colonies on Mars, and all the other technological wonders any child growing up in the mid-to-late twentieth century assumed would exist by now? Even those inventions that seemed ready to emerge—like cloning or cryogenics—ended up betraying their lofty promises. What happened to them?

We are well informed of the wonders of computers, as if this is some sort of unanticipated compensation, but, in fact, we haven’t moved even computing to the point of progress that people in the fifties expected we’d have reached by now. We don’t have computers we can have an interesting conversation with, or robots that can walk our dogs or take our clothes to the Laundromat.

As someone who was eight years old at the time of the Apollo moon landing, I remember calculating that I would be thirty-nine in the magic year 2000 and wondering what the world would be like. Did I expect I would be living in such a world of wonders? Of course. Everyone did. Do I feel cheated now? It seemed unlikely that I’d live to see all the things I was reading about in science fiction, but it never occurred to me that I wouldn’t see any of them.

At the turn of the millennium, I was expecting an outpouring of reflections on why we had gotten the future of technology so wrong. Instead, just about all the authoritative voices—both Left and Right—began their reflections from the assumption that we do live in an unprecedented new technological utopia of one sort or another.

The common way of dealing with the uneasy sense that this might not be so is to brush it aside, to insist all the progress that could have happened has happened and to treat anything more as silly. “Oh, you mean all that Jetsons stuff?” I’m asked—as if to say, but that was just for children! Surely, as grown-ups, we understand The Jetsons offered as accurate a view of the future as The Flintstones offered of the Stone Age.

Surely, as grown-ups, we understand The Jetsons offered as accurate a view of the future as The Flintstones did of the Stone Age.

Even in the seventies and eighties, in fact, sober sources such as National Geographic and the Smithsonian were informing children of imminent space stations and expeditions to Mars. Creators of science fiction movies used to come up with concrete dates, often no more than a generation in the future, in which to place their futuristic fantasies. In 1968, Stanley Kubrick felt that a moviegoing audience would find it perfectly natural to assume that only thirty-three years later, in 2001, we would have commercial moon flights, city-like space stations, and computers with human personalities maintaining astronauts in suspended animation while traveling to Jupiter. Video telephony is just about the only new technology from that particular movie that has appeared—and it was technically possible when the movie was showing. 2001 can be seen as a curio, but what about Star Trek? The Star Trek mythos was set in the sixties, too, but the show kept getting revived, leaving audiences for Star Trek Voyager in, say, 2005, to try to figure out what to make of the fact that according to the logic of the program, the world was supposed to be recovering from fighting off the rule of genetically engineered supermen in the Eugenics Wars of the nineties.

By 1989, when the creators of Back to the Future II were dutifully placing flying cars and anti-gravity hoverboards in the hands of ordinary teenagers in the year 2015, it wasn’t clear if this was meant as a prediction or a joke.

The usual move in science fiction is to remain vague about the dates, so as to render “the future” a zone of pure fantasy, no different than Middle Earth or Narnia, or like Star Wars, “a long time ago in a galaxy far, far away.” As a result, our science fiction future is, most often, not a future at all, but more like an alternative dimension, a dream-time, a technological Elsewhere, existing in days to come in the same sense that elves and dragon-slayers existed in the past—another screen for the displacement of moral dramas and mythic fantasies into the dead ends of consumer pleasure.

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Might the cultural sensibility that came to be referred to as postmodernism best be seen as a prolonged meditation on all the technological changes that never happened? The question struck me as I watched one of the recent Star Wars movies. The movie was terrible, but I couldn’t help but feel impressed by the quality of the special effects. Recalling the clumsy special effects typical of fifties sci-fi films, I kept thinking how impressed a fifties audience would have been if they’d known what we could do by now—only to realize, “Actually, no. They wouldn’t be impressed at all, would they? They thought we’d be doing this kind of thing by now. Not just figuring out more sophisticated ways to simulate it.”

That last word—simulate—is key. The technologies that have advanced since the seventies are mainly either medical technologies or information technologies—largely, technologies of simulation. They are technologies of what Jean Baudrillard and Umberto Eco called the “hyper-real,” the ability to make imitations that are more realistic than originals. The postmodern sensibility, the feeling that we had somehow broken into an unprecedented new historical period in which we understood that there is nothing new; that grand historical narratives of progress and liberation were meaningless; that everything now was simulation, ironic repetition, fragmentation, and pastiche—all this makes sense in a technological environment in which the only breakthroughs were those that made it easier to create, transfer, and rearrange virtual projections of things that either already existed, or, we came to realize, never would. Surely, if we were vacationing in geodesic domes on Mars or toting about pocket-size nuclear fusion plants or telekinetic mind-reading devices no one would ever have been talking like this. The postmodern moment was a desperate way to take what could otherwise only be felt as a bitter disappointment and to dress it up as something epochal, exciting, and new.

In the earliest formulations, which largely came out of the Marxist tradition, a lot of this technological background was acknowledged. Fredric Jameson’s “Postmodernism, or the Cultural Logic of Late Capitalism” proposed the term “postmodernism” to refer to the cultural logic appropriate to a new, technological phase of capitalism, one that had been heralded by Marxist economist Ernest Mandel as early as 1972. Mandel had argued that humanity stood at the verge of a “third technological revolution,” as profound as the Agricultural or Industrial Revolution, in which computers, robots, new energy sources, and new information technologies would replace industrial labor—the “end of work” as it soon came to be called—reducing us all to designers and computer technicians coming up with crazy visions that cybernetic factories would produce.

End of work arguments were popular in the late seventies and early eighties as social thinkers pondered what would happen to the traditional working-class-led popular struggle once the working class no longer existed. (The answer: it would turn into identity politics.) Jameson thought of himself as exploring the forms of consciousness and historical sensibilities likely to emerge from this new age.

What happened, instead, is that the spread of information technologies and new ways of organizing transport—the containerization of shipping, for example—allowed those same industrial jobs to be outsourced to East Asia, Latin America, and other countries where the availability of cheap labor allowed manufacturers to employ much less technologically sophisticated production-line techniques than they would have been obliged to employ at home.

From the perspective of those living in Europe, North America, and Japan, the results did seem to be much as predicted. Smokestack industries did disappear; jobs came to be divided between a lower stratum of service workers and an upper stratum sitting in antiseptic bubbles playing with computers. But below it all lay an uneasy awareness that the postwork civilization was a giant fraud. Our carefully engineered high-tech sneakers were not being produced by intelligent cyborgs or self-replicating molecular nanotechnology; they were being made on the equivalent of old-fashioned Singer sewing machines, by the daughters of Mexican and Indonesian farmers who, as the result of WTO or NAFTA–sponsored trade deals, had been ousted from their ancestral lands. It was a guilty awareness that lay beneath the postmodern sensibility and its celebration of the endless play of images and surfaces.

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Why did the projected explosion of technological growth everyone was expecting—the moon bases, the robot factories—fail to happen? There are two possibilities. Either our expectations about the pace of technological change were unrealistic (in which case, we need to know why so many intelligent people believed they were not) or our expectations were not unrealistic (in which case, we need to know what happened to derail so many credible ideas and prospects).

Most social analysts choose the first explanation and trace the problem to the Cold War space race. Why, these analysts wonder, did both the United States and the Soviet Union become so obsessed with the idea of manned space travel? It was never an efficient way to engage in scientific research. And it encouraged unrealistic ideas of what the human future would be like.

Could the answer be that both the United States and the Soviet Union had been, in the century before, societies of pioneers, one expanding across the Western frontier, the other across Siberia? Didn’t they share a commitment to the myth of a limitless, expansive future, of human colonization of vast empty spaces, that helped convince the leaders of both superpowers they had entered into a “space age” in which they were battling over control of the future itself? All sorts of myths were at play here, no doubt, but that proves nothing about the feasibility of the project.

Some of those science fiction fantasies (at this point we can’t know which ones) could have been brought into being. For earlier generations, many science fiction fantasies had been brought into being. Those who grew up at the turn of the century reading Jules Verne or H.G. Wells imagined the world of, say, 1960 with flying machines, rocket ships, submarines, radio, and television—and that was pretty much what they got. If it wasn’t unrealistic in 1900 to dream of men traveling to the moon, then why was it unrealistic in the sixties to dream of jet-packs and robot laundry-maids?

In fact, even as those dreams were being outlined, the material base for their achievement was beginning to be whittled away. There is reason to believe that even by the fifties and sixties, the pace of technological innovation was slowing down from the heady pace of the first half of the century. There was a last spate in the fifties when microwave ovens (1954), the Pill (1957), and lasers (1958) all appeared in rapid succession. But since then, technological advances have taken the form of clever new ways of combining existing technologies (as in the space race) and new ways of putting existing technologies to consumer use (the most famous example is television, invented in 1926, but mass produced only after the war.) Yet, in part because the space race gave everyone the impression that remarkable advances were happening, the popular impression during the sixties was that the pace of technological change was speeding up in terrifying, uncontrollable ways.

Alvin Toffler’s 1970 best seller Future Shock argued that almost all the social problems of the sixties could be traced back to the increasing pace of technological change. The endless outpouring of scientific breakthroughs transformed the grounds of daily existence, and left Americans without any clear idea of what normal life was. Just consider the family, where not just the Pill, but also the prospect of in vitro fertilization, test tube babies, and sperm and egg donation were about to make the idea of motherhood obsolete.

Humans were not psychologically prepared for the pace of change, Toffler wrote. He coined a term for the phenomenon: “accelerative thrust.” It had begun with the Industrial Revolution, but by roughly 1850, the effect had become unmistakable. Not only was everything around us changing, but most of it—human knowledge, the size of the population, industrial growth, energy use—was changing exponentially. The only solution, Toffler argued, was to begin some kind of control over the process, to create institutions that would assess emerging technologies and their likely effects, to ban technologies likely to be too socially disruptive, and to guide development in the direction of social harmony.

While many of the historical trends Toffler describes are accurate, the book appeared when most of these exponential trends halted. It was right around 1970 when the increase in the number of scientific papers published in the world—a figure that had doubled every fifteen years since, roughly, 1685—began leveling off. The same was true of books and patents.

Toffler’s use of acceleration was particularly unfortunate. For most of human history, the top speed at which human beings could travel had been around 25 miles per hour. By 1900 it had increased to 100 miles per hour, and for the next seventy years it did seem to be increasing exponentially. By the time Toffler was writing, in 1970, the record for the fastest speed at which any human had traveled stood at roughly 25,000 mph, achieved by the crew of Apollo 10 in 1969, just one year before. At such an exponential rate, it must have seemed reasonable to assume that within a matter of decades, humanity would be exploring other solar systems.

Since 1970, no further increase has occurred. The record for the fastest a human has ever traveled remains with the crew of Apollo 10. True, the commercial airliner Concorde, which first flew in 1969, reached a maximum speed of 1,400 mph. And the Soviet Tupolev Tu-144, which flew first, reached an even faster speed of 1,553 mph. But those speeds not only have failed to increase; they have decreased since the Tupolev Tu-144 was cancelled and the Concorde was abandoned.

None of this stopped Toffler’s own career. He kept retooling his analysis to come up with new spectacular pronouncements. In 1980, he produced The Third Wave, its argument lifted from Ernest Mandel’s “third technological revolution”—except that while Mandel thought these changes would spell the end of capitalism, Toffler assumed capitalism was eternal. By 1990, Toffler was the personal intellectual guru to Republican congressman Newt Gingrich, who claimed that his 1994 “Contract With America” was inspired, in part, by the understanding that the United States needed to move from an antiquated, materialist, industrial mind-set to a new, free-market, information age, Third Wave civilization.

There are all sorts of ironies in this connection. One of Toffler’s greatest achievements was inspiring the government to create an Office of Technology Assessment (OTA). One of Gingrich’s first acts on winning control of the House of Representatives in 1995 was defunding the OTA as an example of useless government extravagance. Still, there’s no contradiction here. By this time, Toffler had long since given up on influencing policy by appealing to the general public; he was making a living largely by giving seminars to CEOs and corporate think tanks. His insights had been privatized.

Gingrich liked to call himself a “conservative futurologist.” This, too, might seem oxymoronic; but, in fact, Toffler’s own conception of futurology was never progressive. Progress was always presented as a problem that needed to be solved.

Toffler might best be seen as a lightweight version of the nineteenth-century social theorist Auguste Comte, who believed that he was standing on the brink of a new age—in his case, the Industrial Age—driven by the inexorable progress of technology, and that the social cataclysms of his times were caused by the social system not adjusting. The older feudal order had developed Catholic theology, a way of thinking about man’s place in the cosmos perfectly suited to the social system of the time, as well as an institutional structure, the Church, that conveyed and enforced such ideas in a way that could give everyone a sense of meaning and belonging. The Industrial Age had developed its own system of ideas—science—but scientists had not succeeded in creating anything like the Catholic Church. Comte concluded that we needed to develop a new science, which he dubbed “sociology,” and said that sociologists should play the role of priests in a new Religion of Society that would inspire everyone with a love of order, community, work discipline, and family values. Toffler was less ambitious; his futurologists were not supposed to play the role of priests.

Gingrich had a second guru, a libertarian theologian named George Gilder, and Gilder, like Toffler, was obsessed with technology and social change. In an odd way, Gilder was more optimistic. Embracing a radical version of Mandel’s Third Wave argument, he insisted that what we were seeing with the rise of computers was an “overthrow of matter.” The old, materialist Industrial Society, where value came from physical labor, was giving way to an Information Age where value emerges directly from the minds of entrepreneurs, just as the world had originally appeared ex nihilo from the mind of God, just as money, in a proper supply-side economy, emerged ex nihilo from the Federal Reserve and into the hands of value-creating capitalists. Supply-side economic policies, Gilder concluded, would ensure that investment would continue to steer away from old government boondoggles like the space program and toward more productive information and medical technologies.

But if there was a conscious, or semi-conscious, move away from investment in research that might lead to better rockets and robots, and toward research that would lead to such things as laser printers and CAT scans, it had begun well before Toffler’s Future Shock (1970) and Gilder’s Wealth and Poverty (1981). What their success shows is that the issues they raised—that existing patterns of technological development would lead to social upheaval, and that we needed to guide technological development in directions that did not challenge existing structures of authority—echoed in the corridors of power. Statesmen and captains of industry had been thinking about such questions for some time.

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Industrial capitalism has fostered an extremely rapid rate of scientific advance and technological innovation—one with no parallel in previous human history. Even capitalism’s greatest detractors, Karl Marx and Friedrich Engels, celebrated its unleashing of the “productive forces.” Marx and Engels also believed that capitalism’s continual need to revolutionize the means of industrial production would be its undoing. Marx argued that, for certain technical reasons, value—and therefore profits—can be extracted only from human labor. Competition forces factory owners to mechanize production, to reduce labor costs, but while this is to the short-term advantage of the firm, mechanization’s effect is to drive down the general rate of profit.

For 150 years, economists have debated whether all this is true. But if it is true, then the decision by industrialists not to pour research funds into the invention of the robot factories that everyone was anticipating in the sixties, and instead to relocate their factories to labor-intensive, low-tech facilities in China or the Global South makes a great deal of sense.

As I’ve noted, there’s reason to believe the pace of technological innovation in productive processes—the factories themselves—began to slow in the fifties and sixties, but the side effects of America’s rivalry with the Soviet Union made innovation appear to accelerate. There was the awesome space race, alongside frenetic efforts by U.S. industrial planners to apply existing technologies to consumer purposes, to create an optimistic sense of burgeoning prosperity and guaranteed progress that would undercut the appeal of working-class politics.

These moves were reactions to initiatives from the Soviet Union. But this part of the history is difficult for Americans to remember, because at the end of the Cold War, the popular image of the Soviet Union switched from terrifyingly bold rival to pathetic basket case—the exemplar of a society that could not work. Back in the fifties, in fact, many United States planners suspected the Soviet system worked better. Certainly, they recalled the fact that in the thirties, while the United States had been mired in depression, the Soviet Union had maintained almost unprecedented economic growth rates of 10 percent to 12 percent a year—an achievement quickly followed by the production of tank armies that defeated Nazi Germany, then by the launching of Sputnik in 1957, then by the first manned spacecraft, the Vostok, in 1961.

It’s often said the Apollo moon landing was the greatest historical achievement of Soviet communism. Surely, the United States would never have contemplated such a feat had it not been for the cosmic ambitions of the Soviet Politburo. We are used to thinking of the Politburo as a group of unimaginative gray bureaucrats, but they were bureaucrats who dared to dream astounding dreams. The dream of world revolution was only the first. It’s also true that most of them—changing the course of mighty rivers, this sort of thing—either turned out to be ecologically and socially disastrous, or, like Joseph Stalin’s one-hundred-story Palace of the Soviets or a twenty-story statue of Vladimir Lenin, never got off the ground.

After the initial successes of the Soviet space program, few of these schemes were realized, but the leadership never ceased coming up with new ones. Even in the eighties, when the United States was attempting its own last, grandiose scheme, Star Wars, the Soviets were planning to transform the world through creative uses of technology. Few outside of Russia remember most of these projects, but great resources were devoted to them. It’s also worth noting that unlike the Star Wars project, which was designed to sink the Soviet Union, most were not military in nature: as, for instance, the attempt to solve the world hunger problem by harvesting lakes and oceans with an edible bacteria called spirulina, or to solve the world energy problem by launching hundreds of gigantic solar-power platforms into orbit and beaming the electricity back to earth.

The American victory in the space race meant that, after 1968, U.S. planners no longer took the competition seriously. As a result, the mythology of the final frontier was maintained, even as the direction of research and development shifted away from anything that might lead to the creation of Mars bases and robot factories.

The standard line is that all this was a result of the triumph of the market. The Apollo program was a Big Government project, Soviet-inspired in the sense that it required a national effort coordinated by government bureaucracies. As soon as the Soviet threat drew safely out of the picture, though, capitalism was free to revert to lines of technological development more in accord with its normal, decentralized, free-market imperatives—such as privately funded research into marketable products like personal computers. This is the line that men like Toffler and Gilder took in the late seventies and early eighties.

In fact, the United States never did abandon gigantic, government-controlled schemes of technological development. Mainly, they just shifted to military research—and not just to Soviet-scale schemes like Star Wars, but to weapons projects, research in communications and surveillance technologies, and similar security-related concerns. To some degree this had always been true: the billions poured into missile research had always dwarfed the sums allocated to the space program. Yet by the seventies, even basic research came to be conducted following military priorities. One reason we don’t have robot factories is because roughly 95 percent of robotics research funding has been channeled through the Pentagon, which is more interested in developing unmanned drones than in automating paper mills.

A case could be made that even the shift to research and development on information technologies and medicine was not so much a reorientation toward market-driven consumer imperatives, but part of an all-out effort to follow the technological humbling of the Soviet Union with total victory in the global class war—seen simultaneously as the imposition of absolute U.S. military dominance overseas, and, at home, the utter rout of social movements.

For the technologies that did emerge proved most conducive to surveillance, work discipline, and social control. Computers have opened up certain spaces of freedom, as we’re constantly reminded, but instead of leading to the workless utopia Abbie Hoffman imagined, they have been employed in such a way as to produce the opposite effect. They have enabled a financialization of capital that has driven workers desperately into debt, and, at the same time, provided the means by which employers have created “flexible” work regimes that have both destroyed traditional job security and increased working hours for almost everyone. Along with the export of factory jobs, the new work regime has routed the union movement and destroyed any possibility of effective working-class politics.

Meanwhile, despite unprecedented investment in research on medicine and life sciences, we await cures for cancer and the common cold, and the most dramatic medical breakthroughs we have seen have taken the form of drugs such as Prozac, Zoloft, or Ritalin—tailor-made to ensure that the new work demands don’t drive us completely, dysfunctionally crazy.

With results like these, what will the epitaph for neoliberalism look like? I think historians will conclude it was a form of capitalism that systematically prioritized political imperatives over economic ones. Given a choice between a course of action that would make capitalism seem the only possible economic system, and one that would transform capitalism into a viable, long-term economic system, neoliberalism chooses the former every time. There is every reason to believe that destroying job security while increasing working hours does not create a more productive (let alone more innovative or loyal) workforce. Probably, in economic terms, the result is negative—an impression confirmed by lower growth rates in just about all parts of the world in the eighties and nineties.

But the neoliberal choice has been effective in depoliticizing labor and overdetermining the future. Economically, the growth of armies, police, and private security services amounts to dead weight. It’s possible, in fact, that the very dead weight of the apparatus created to ensure the ideological victory of capitalism will sink it. But it’s also easy to see how choking off any sense of an inevitable, redemptive future that could be different from our world is a crucial part of the neoliberal project.

At this point all the pieces would seem to be falling neatly into place. By the sixties, conservative political forces were growing skittish about the socially disruptive effects of technological progress, and employers were beginning to worry about the economic impact of mechanization. The fading Soviet threat allowed for a reallocation of resources in directions seen as less challenging to social and economic arrangements, or indeed directions that could support a campaign of reversing the gains of progressive social movements and achieving a decisive victory in what U.S. elites saw as a global class war. The change of priorities was introduced as a withdrawal of big-government projects and a return to the market, but in fact the change shifted government-directed research away from programs like NASA or alternative energy sources and toward military, information, and medical technologies.

Of course this doesn’t explain everything. Above all, it does not explain why, even in those areas that have become the focus of well-funded research projects, we have not seen anything like the kind of advances anticipated fifty years ago. If 95 percent of robotics research has been funded by the military, then where are the Klaatu-style killer robots shooting death rays from their eyes?

Obviously, there have been advances in military technology in recent decades. One of the reasons we all survived the Cold War is that while nuclear bombs might have worked as advertised, their delivery systems did not; intercontinental ballistic missiles weren’t capable of striking cities, let alone specific targets inside cities, and this fact meant there was little point in launching a nuclear first strike unless you intended to destroy the world.

Contemporary cruise missiles are accurate by comparison. Still, precision weapons never do seem capable of assassinating specific individuals (Saddam, Osama, Qaddafi), even when hundreds are dropped. And ray guns have not materialized—surely not for lack of trying. We can assume the Pentagon has spent billions on death ray research, but the closest they’ve come so far are lasers that might, if aimed correctly, blind an enemy gunner looking directly at the beam. Aside from being unsporting, this is pathetic: lasers are a fifties technology. Phasers that can be set to stun do not appear to be on the drawing boards; and when it comes to infantry combat, the preferred weapon almost everywhere remains the AK-47, a Soviet design named for the year it was introduced: 1947.

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The Internet is a remarkable innovation, but all we are talking about is a super-fast and globally accessible combination of library, post office, and mail-order catalogue. Had the Internet been described to a science fiction aficionado in the fifties and sixties and touted as the most dramatic technological achievement since his time, his reaction would have been disappointment. Fifty years and this is the best our scientists managed to come up with? We expected computers that would think!

Overall, levels of research funding have increased dramatically since the seventies. Admittedly, the proportion of that funding that comes from the corporate sector has increased most dramatically, to the point that private enterprise is now funding twice as much research as the government, but the increase is so large that the total amount of government research funding, in real-dollar terms, is much higher than it was in the sixties. “Basic,” “curiosity-driven,” or “blue skies” research—the kind that is not driven by the prospect of any immediate practical application, and that is most likely to lead to unexpected breakthroughs—occupies an ever smaller proportion of the total, though so much money is being thrown around nowadays that overall levels of basic research funding have increased.

Yet most observers agree that the results have been paltry. Certainly we no longer see anything like the continual stream of conceptual revolutions—genetic inheritance, relativity, psychoanalysis, quantum mechanics—that people had grown used to, and even expected, a hundred years before. Why?

Part of the answer has to do with the concentration of resources on a handful of gigantic projects: “big science,” as it has come to be called. The Human Genome Project is often held out as an example. After spending almost three billion dollars and employing thousands of scientists and staff in five different countries, it has mainly served to establish that there isn’t very much to be learned from sequencing genes that’s of much use to anyone else. Even more, the hype and political investment surrounding such projects demonstrate the degree to which even basic research now seems to be driven by political, administrative, and marketing imperatives that make it unlikely anything revolutionary will happen.

Here, our fascination with the mythic origins of Silicon Valley and the Internet has blinded us to what’s really going on. It has allowed us to imagine that research and development is now driven, primarily, by small teams of plucky entrepreneurs, or the sort of decentralized cooperation that creates open-source software. This is not so, even though such research teams are most likely to produce results. Research and development is still driven by giant bureaucratic projects.

What has changed is the bureaucratic culture. The increasing interpenetration of government, university, and private firms has led everyone to adopt the language, sensibilities, and organizational forms that originated in the corporate world. Although this might have helped in creating marketable products, since that is what corporate bureaucracies are designed to do, in terms of fostering original research, the results have been catastrophic.

My own knowledge comes from universities, both in the United States and Britain. In both countries, the last thirty years have seen a veritable explosion of the proportion of working hours spent on administrative tasks at the expense of pretty much everything else. In my own university, for instance, we have more administrators than faculty members, and the faculty members, too, are expected to spend at least as much time on administration as on teaching and research combined. The same is true, more or less, at universities worldwide.

The growth of administrative work has directly resulted from introducing corporate management techniques. Invariably, these are justified as ways of increasing efficiency and introducing competition at every level. What they end up meaning in practice is that everyone winds up spending most of their time trying to sell things: grant proposals; book proposals; assessments of students’ jobs and grant applications; assessments of our colleagues; prospectuses for new interdisciplinary majors; institutes; conference workshops; universities themselves (which have now become brands to be marketed to prospective students or contributors); and so on.

As marketing overwhelms university life, it generates documents about fostering imagination and creativity that might just as well have been designed to strangle imagination and creativity in the cradle. No major new works of social theory have emerged in the United States in the last thirty years. We have been reduced to the equivalent of medieval scholastics, writing endless annotations of French theory from the seventies, despite the guilty awareness that if new incarnations of Gilles Deleuze, Michel Foucault, or Pierre Bourdieu were to appear in the academy today, we would deny them tenure.

There was a time when academia was society’s refuge for the eccentric, brilliant, and impractical. No longer. It is now the domain of professional self-marketers. As a result, in one of the most bizarre fits of social self-destructiveness in history, we seem to have decided we have no place for our eccentric, brilliant, and impractical citizens. Most languish in their mothers’ basements, at best making the occasional, acute intervention on the Internet.

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If all this is true in the social sciences, where research is still carried out with minimal overhead largely by individuals, one can imagine how much worse it is for astrophysicists. And, indeed, one astrophysicist, Jonathan Katz, has recently warned students pondering a career in the sciences. Even if you do emerge from the usual decade-long period languishing as someone else’s flunky, he says, you can expect your best ideas to be stymied at every point:

You will spend your time writing proposals rather than doing research. Worse, because your proposals are judged by your competitors, you cannot follow your curiosity, but must spend your effort and talents on anticipating and deflecting criticism rather than on solving the important scientific problems. . . . It is proverbial that original ideas are the kiss of death for a proposal, because they have not yet been proved to work.

That pretty much answers the question of why we don’t have teleportation devices or antigravity shoes. Common sense suggests that if you want to maximize scientific creativity, you find some bright people, give them the resources they need to pursue whatever idea comes into their heads, and then leave them alone. Most will turn up nothing, but one or two may well discover something. But if you want to minimize the possibility of unexpected breakthroughs, tell those same people they will receive no resources at all unless they spend the bulk of their time competing against each other to convince you they know in advance what they are going to discover.

In the natural sciences, to the tyranny of managerialism we can add the privatization of research results. As the British economist David Harvie has reminded us, “open source” research is not new. Scholarly research has always been open source, in the sense that scholars share materials and results. There is competition, certainly, but it is “convivial.” This is no longer true of scientists working in the corporate sector, where findings are jealously guarded, but the spread of the corporate ethos within the academy and research institutes themselves has caused even publicly funded scholars to treat their findings as personal property. Academic publishers ensure that findings that are published are increasingly difficult to access, further enclosing the intellectual commons. As a result, convivial, open-source competition turns into something much more like classic market competition.

There are many forms of privatization, up to and including the simple buying up and suppression of inconvenient discoveries by large corporations fearful of their economic effects. (We cannot know how many synthetic fuel formulae have been bought up and placed in the vaults of oil companies, but it’s hard to imagine nothing like this happens.) More subtle is the way the managerial ethos discourages everything adventurous or quirky, especially if there is no prospect of immediate results. Oddly, the Internet can be part of the problem here. As Neal Stephenson put it:

Most people who work in corporations or academia have witnessed something like the following: A number of engineers are sitting together in a room, bouncing ideas off each other. Out of the discussion emerges a new concept that seems promising. Then some laptop-wielding person in the corner, having performed a quick Google search, announces that this “new” idea is, in fact, an old one; it—or at least something vaguely similar—has already been tried. Either it failed, or it succeeded. If it failed, then no manager who wants to keep his or her job will approve spending money trying to revive it. If it succeeded, then it’s patented and entry to the market is presumed to be unattainable, since the first people who thought of it will have “first-mover advantage” and will have created “barriers to entry.” The number of seemingly promising ideas that have been crushed in this way must number in the millions.

And so a timid, bureaucratic spirit suffuses every aspect of cultural life. It comes festooned in a language of creativity, initiative, and entrepreneurialism. But the language is meaningless. Those thinkers most likely to make a conceptual breakthrough are the least likely to receive funding, and, if breakthroughs occur, they are not likely to find anyone willing to follow up on their most daring implications.

Giovanni Arrighi has noted that after the South Sea Bubble, British capitalism largely abandoned the corporate form. By the time of the Industrial Revolution, Britain had instead come to rely on a combination of high finance and small family firms—a pattern that held throughout the next century, the period of maximum scientific and technological innovation. (Britain at that time was also notorious for being just as generous to its oddballs and eccentrics as contemporary America is intolerant. A common expedient was to allow them to become rural vicars, who, predictably, became one of the main sources for amateur scientific discoveries.)

Contemporary, bureaucratic corporate capitalism was a creation not of Britain, but of the United States and Germany, the two rival powers that spent the first half of the twentieth century fighting two bloody wars over who would replace Britain as a dominant world power—wars that culminated, appropriately enough, in government-sponsored scientific programs to see who would be the first to discover the atom bomb. It is significant, then, that our current technological stagnation seems to have begun after 1945, when the United States replaced Britain as organizer of the world economy.

Americans do not like to think of themselves as a nation of bureaucrats—quite the opposite—but the moment we stop imagining bureaucracy as a phenomenon limited to government offices, it becomes obvious that this is precisely what we have become. The final victory over the Soviet Union did not lead to the domination of the market, but, in fact, cemented the dominance of conservative managerial elites, corporate bureaucrats who use the pretext of short-term, competitive, bottom-line thinking to squelch anything likely to have revolutionary implications of any kind.

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If we do not notice that we live in a bureaucratic society, that is because bureaucratic norms and practices have become so all-pervasive that we cannot see them, or, worse, cannot imagine doing things any other way.

Computers have played a crucial role in this narrowing of our social imaginations. Just as the invention of new forms of industrial automation in the eighteenth and nineteenth centuries had the paradoxical effect of turning more and more of the world’s population into full-time industrial workers, so has all the software designed to save us from administrative responsibilities turned us into part- or full-time administrators. In the same way that university professors seem to feel it is inevitable they will spend more of their time managing grants, so affluent housewives simply accept that they will spend weeks every year filling out forty-page online forms to get their children into grade schools. We all spend increasing amounts of time punching passwords into our phones to manage bank and credit accounts and learning how to perform jobs once performed by travel agents, brokers, and accountants.

Someone once figured out that the average American will spend a cumulative six months of life waiting for traffic lights to change. I don’t know if similar figures are available for how long it takes to fill out forms, but it must be at least as long. No population in the history of the world has spent nearly so much time engaged in paperwork.

In this final, stultifying stage of capitalism, we are moving from poetic technologies to bureaucratic technologies. By poetic technologies I refer to the use of rational and technical means to bring wild fantasies to reality. Poetic technologies, so understood, are as old as civilization. Lewis Mumford noted that the first complex machines were made of people. Egyptian pharaohs were able to build the pyramids only because of their mastery of administrative procedures, which allowed them to develop production-line techniques, dividing up complex tasks into dozens of simple operations and assigning each to one team of workmen—even though they lacked mechanical technology more complex than the inclined plane and lever. Administrative oversight turned armies of peasant farmers into the cogs of a vast machine. Much later, after cogs had been invented, the design of complex machinery elaborated principles originally developed to organize people.

Yet we have seen those machines—whether their moving parts are arms and torsos or pistons, wheels, and springs—being put to work to realize impossible fantasies: cathedrals, moon shots, transcontinental railways. Certainly, poetic technologies had something terrible about them; the poetry is likely to be as much of dark satanic mills as of grace or liberation. But the rational, administrative techniques were always in service to some fantastic end.

From this perspective, all those mad Soviet plans—even if never realized—marked the climax of poetic technologies. What we have now is the reverse. It’s not that vision, creativity, and mad fantasies are no longer encouraged, but that most remain free-floating; there’s no longer even the pretense that they could ever take form or flesh. The greatest and most powerful nation that has ever existed has spent the last decades telling its citizens they can no longer contemplate fantastic collective enterprises, even if—as the environmental crisis demands— the fate of the earth depends on it.

What are the political implications of all this? First of all, we need to rethink some of our most basic assumptions about the nature of capitalism. One is that capitalism is identical with the market, and that both therefore are inimical to bureaucracy, which is supposed to be a creature of the state.

The second assumption is that capitalism is in its nature technologically progressive. It would seem that Marx and Engels, in their giddy enthusiasm for the industrial revolutions of their day, were wrong about this. Or, to be more precise: they were right to insist that the mechanization of industrial production would destroy capitalism; they were wrong to predict that market competition would compel factory owners to mechanize anyway. If it didn’t happen, that is because market competition is not, in fact, as essential to the nature of capitalism as they had assumed. If nothing else, the current form of capitalism, where much of the competition seems to take the form of internal marketing within the bureaucratic structures of large semi-monopolistic enterprises, would come as a complete surprise to them.

Defenders of capitalism make three broad historical claims: first, that it has fostered rapid scientific and technological growth; second, that however much it may throw enormous wealth to a small minority, it does so in such a way as to increase overall prosperity; third, that in doing so, it creates a more secure and democratic world for everyone. It is clear that capitalism is not doing any of these things any longer. In fact, many of its defenders are retreating from claiming that it is a good system and instead falling back on the claim that it is the only possible system—or, at least, the only possible system for a complex, technologically sophisticated society such as our own.

But how could anyone argue that current economic arrangements are also the only ones that will ever be viable under any possible future technological society? The argument is absurd. How could anyone know?

Granted, there are people who take that position—on both ends of the political spectrum. As an anthropologist and anarchist, I encounter anticivilizational types who insist not only that current industrial technology leads only to capitalist-style oppression, but that this must necessarily be true of any future technology as well, and therefore that human liberation can be achieved only by returning to the Stone Age. Most of us are not technological determinists.

But claims for the inevitability of capitalism have to be based on a kind of technological determinism. And for that very reason, if the aim of neoliberal capitalism is to create a world in which no one believes any other economic system could work, then it needs to suppress not just any idea of an inevitable redemptive future, but any radically different technological future. Yet there’s a contradiction. Defenders of capitalism cannot mean to convince us that technological change has ended—since that would mean capitalism is not progressive. No, they mean to convince us that technological progress is indeed continuing, that we do live in a world of wonders, but that those wonders take the form of modest improvements (the latest iPhone!), rumors of inventions about to happen (“I hear they are going to have flying cars pretty soon”), complex ways of juggling information and imagery, and still more complex platforms for filling out of forms.

I do not mean to suggest that neoliberal capitalism—or any other system—can be successful in this regard. First, there’s the problem of trying to convince the world you are leading the way in technological progress when you are holding it back. The United States, with its decaying infrastructure, paralysis in the face of global warming, and symbolically devastating abandonment of its manned space program just as China accelerates its own, is doing a particularly bad public relations job. Second, the pace of change can’t be held back forever. Breakthroughs will happen; inconvenient discoveries cannot be permanently suppressed. Other, less bureaucratized parts of the world—or at least, parts of the world with bureaucracies that are not so hostile to creative thinking—will slowly but inevitably attain the resources required to pick up where the United States and its allies have left off. The Internet does provide opportunities for collaboration and dissemination that may help break us through the wall as well. Where will the breakthrough come? We can’t know. Maybe 3D printing will do what the robot factories were supposed to. Or maybe it will be something else. But it will happen.

About one conclusion we can feel especially confident: it will not happen within the framework of contemporary corporate capitalism—or any form of capitalism. To begin setting up domes on Mars, let alone to develop the means to figure out if there are alien civilizations to contact, we’re going to have to figure out a different economic system. Must the new system take the form of some massive new bureaucracy? Why do we assume it must? Only by breaking up existing bureaucratic structures can we begin. And if we’re going to invent robots that will do our laundry and tidy up the kitchen, then we’re going to have to make sure that whatever replaces capitalism is based on a far more egalitarian distribution of wealth and power—one that no longer contains either the super-rich or the desperately poor willing to do their housework. Only then will technology begin to be marshaled toward human needs. And this is the best reason to break free of the dead hand of the hedge fund managers and the CEOs—to free our fantasies from the screens in which such men have imprisoned them, to let our imaginations once again become a material force in human history.


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[Jun 17, 2018] The Necessity of a Trump-Putin Summit by Stephen F. Cohen

Highly recommended!
Decimation of anti-war forces and flourishing of Russophobia are two immanent features of the US neoliberalism. As long as the maintinace fo the US global neoliberal empire depends of weakening and, possibly, dismembering Russia it is naive to expect any change. Russian version of soft "national neoliberalism" is not that different, in principle form Trump version of hard "netional neoliberalism" so those leaders might have something to talk about. In other words as soon as the USA denounce neoliberal globalization that might be some openings.
Notable quotes:
"... The New York Times ..."
Jun 06, 2018 | www.thenation.com

Ten ways the new US-Russian Cold War is increasingly becoming more dangerous than the one we survived.

  1. The political epicenter of the new Cold War is not in far-away Berlin, as it was from the late 1940s on, but directly on Russia's borders, from the Baltic states and Ukraine to the former Soviet republic of Georgia. Each of these new Cold War fronts is, or has recently been, fraught with the possibly of hot war. US-Russian military relations are especially tense today in the Baltic region, where a large-scale NATO buildup is under way, and in Ukraine, where a US-Russian proxy war is intensifying. The "Soviet Bloc" that once served as a buffer between NATO and Russia no longer exists. And many imaginable incidents on the West's new Eastern Front, intentional or unintentional, could easily trigger actual war between the United States and Russia. What brought about this unprecedented situation on Russia's borders -- at least since the Nazi German invasion in 1941 -- was, of course, the exceedingly unwise decision, in the late 1990s, to expand NATO eastward. Done in the name of "security," it has made all the states involved only more insecure.

  2. Proxy wars were a feature of the old Cold War, but usually small ones in what was called the "Third World" -- in Africa, for example -- and they rarely involved many, if any, Soviet or American personnel, mostly only money and weapons. Today's US-Russian proxy wars are different, located in the center of geopolitics and accompanied by too many American and Russian trainers, minders, and possibly fighters. Two have already erupted: in Georgia in 2008, where Russian forces fought a Georgian army financed, trained, and minded by American funds and personnel; and in Syria, where in February scores of Russians were killed by US-backed anti-Assad forces . Moscow did not retaliate, but it has pledged to do so if there is "a next time," as there very well may be. If so, this would in effect be war directly between Russia and America. Meanwhile, the risk of such a direct conflict continues to grow in Ukraine, where the country's US-backed but politically failing President Petro Poroshenko seems increasingly tempted to launch another all-out military assault on rebel-controlled Donbass, backed by Moscow. If he does so, and the assault does not quickly fail as previous ones have, Russia will certainly intervene in eastern Ukraine with a truly tangible "invasion." Washington will then have to make a fateful war-or-peace decision. Having already reneged on its commitments to the Minsk Accords, which are the best hope for ending the four-year Ukrainian crisis peacefully, Kiev seems to have an unrelenting impulse to be a tail wagging the dog of war. Certainly, its capacity for provocations and disinformation are second to none, as evidenced again last week by the faked "assassination and resurrection" of the journalist Arkady Babchenko.

  3. The Western, but especially American, years-long demonization of the Kremlin leader, Putin, is also unprecedented. Too obvious to reiterate here, no Soviet leader, at least since Stalin, was ever subjected to such prolonged, baseless, crudely derogatory personal vilification. Whereas Soviet leaders were generally regarded as acceptable negotiating partners for American presidents, including at major summits, Putin has been made to seem to be an illegitimate national leader -- at best "a KGB thug," at worst a murderous "mafia boss."

  4. Still more, demonizing Putin has generated a widespread Russophobic vilification of Russia itself , or what The New York Times and other mainstream-media outlets have taken to calling " Vladimir Putin's Russia ." Yesterday's enemy was Soviet Communism. Today it is increasingly Russia, thereby also delegitimizing Russia as a great power with legitimate national interests. "The Parity Principle," as Cohen termed it during the preceding Cold War -- the principle that both sides had legitimate interests at home and abroad, which was the basis for diplomacy and negotiations, and symbolized by leadership summits -- no longer exists, at least on the American side. Nor does the acknowledgment that both sides were to blame, at least to some extent, for that Cold War. Among influential American observers who at least recognize the reality of the new Cold War , "Putin's Russia" alone is to blame. When there is no recognized parity and shared responsibility, there is little space for diplomacy -- only for increasingly militarized relations, as we are witnessing today.
  5. Meanwhile, most of the Cold War safeguards -- cooperative mechanisms and mutually observed rules of conduct that evolved over decades in order to prevent superpower hot war -- have been vaporized or badly frayed since the Ukrainian crisis in 2014, as the UN General Secretary António Guterres, almost alone, has recognized : "The Cold War is back -- with a vengeance but with a difference. The mechanisms and the safeguards to manage the risks of escalation that existed in the past no longer seem to be present." Trump's recent missile strike on Syria carefully avoided killing any Russians there, but here too Moscow has vowed to retaliate against US launchers or other forces involved if there is a "next time," as, again, there may be. Even the decades-long process of arms control may, we are told by an expert , be coming to an "end." If so, it will mean an unfettered new nuclear-arms race but also the termination of an ongoing diplomatic process that buffered US-Soviet relations during very bad political times. In short, if there are any new Cold War rules of conduct, they are yet to be formulated and mutually accepted. Nor does this semi-anarchy take into account the new warfare technology of cyber-attacks. What are its implications for the secure functioning of existential Russian and American nuclear command-and-control and early-warning systems that guard against an accidental launching of missiles still on high alert?

  6. Russiagate allegations that the American president has been compromised by -- or is even an agent of -- the Kremlin are also without precedent. These allegations have had profoundly dangerous consequences, among them the nonsensical but mantra-like warfare declaration that "Russia attacked America" during the 2016 presidential election; crippling assaults on President Trump every time he speaks with Putin in person or by phone; and making both Trump and Putin so toxic that even most politicians, journalists, and professors who understand the present-day dangers are reluctant to speak out against US contributions to the new Cold War.

  7. Mainstream-media outlets have, of course, played a woeful role in all of this. Unlike in the past, when pro-détente advocates had roughly equal access to mainstream media, today's new Cold War media enforce their orthodox narrative that Russia is solely to blame. They practice not diversity of opinion and reporting but "confirmation bias." Alternative voices (with, yes, alternative or opposing facts) rarely appear any longer in the most influential mainstream newspapers or on television or radio broadcasts. One alarming result is that "disinformation" generated by or pleasing to Washington and its allies has consequences before it can be corrected. The fake Babchenko assassination (allegedly ordered by Putin, of course) was quickly exposed, but not the alleged Skripal assassination attempt in the UK, which led to the largest US expulsion of Russian diplomats in history before London's official version of the story began to fall apart. This too is unprecedented: Cold War without debate, which in turn precludes the frequent rethinking and revising of US policy that characterized the preceding 40-year Cold War -- in effect, an enforced dogmatization of US policy that is both exceedingly dangerous and undemocratic.

  8. Equally unsurprising, and also very much unlike during the 40-year Cold War, there is virtually no significant opposition in the American mainstream to the US role in the new Cold War -- not in the media, not in Congress, not in the two major political parties, not in the universities, not at grassroots levels. This too is unprecedented, dangerous, and contrary to real democracy. Consider only the thunderous silence of scores of large US corporations that have been doing profitable business in post-Soviet Russia for years, from fast-food chains and automobile manufacturers to pharmaceutical and energy giants. And contrast their behavior to that of CEOs of PepsiCo, Control Data, IBM, and other major American corporations seeking entry to the Soviet market in the 1970s and 1980s, when they publicly supported and even funded pro-détente organizations and politicians. How to explain the silence of their counterparts today, who are usually so profit-motivated? Are they too fearful of being labeled "pro-Putin" or possibly "pro-Trump"? If so, will this Cold War continue to unfold with only very rare profiles of courage in any high places? 9. And then there is the widespread escalatory myth that today's Russia, unlike the Soviet Union, is too weak -- its economy too small and fragile, its leader too "isolated in international affairs" -- to wage a sustained Cold War, and that eventually Putin, who is "punching above his weight," as the cliché has it, will capitulate. This too is a dangerous delusion. As Cohen has shown previously , "Putin's Russia" is hardly isolated in world affairs, and is becoming even less so, even in Europe, where at least five governments are tilting away from Washington and Brussels and perhaps from their economic sanctions on Russia. Indeed, despite the sanctions, Russia's energy industry and agricultural exports are flourishing. Geopolitically, Moscow has many military and related advantages in regions where the new Cold War has unfolded. And no state with Russia's modern nuclear and other weapons is "punching above its weight." Above all, the great majority of Russian people have rallied behind Putin because t hey believe their country is under attack by the US-led West . Anyone with a rudimentary knowledge of Russia's history understands it is highly unlikely to capitulate under any circumstances.

  9. Finally (at least as of now), there is the growing war-like "hysteria" often commented on in both Washington and Moscow. It is driven by various factors, but television talk/"news" broadcasts, which are as common in Russia as in the United States, play a major role. Perhaps only an extensive quantitative study could discern which plays a more lamentable role in promoting this frenzy -- MSNBC and CNN or their Russian counterparts. For Cohen, the Russian dark witticism seems apt: "Both are worst" ( Oba khuzhe ). Again, some of this American broadcast extremism existed during the preceding Cold War, but almost always balanced, even offset, by truly informed, wiser opinions, which are now largely excluded.

Is this analysis of the dangers inherent in the new Cold War itself extremist or alarmist? Even SOME usually reticent specialists would seem to agree with Cohen's general assessment. Experts gathered by a centrist Washington think tank thought that on a scale of 1 to 10, there is a 5 to 7 chance of actual war with Russia. A former head of British M16 is reported as saying that "for the first time in living memory, there's a realistic chance of a superpower conflict." And a respected retired Russian general tells the same think tank that any military confrontation "will end up with the use of nuclear weapons between the United States and Russia."

In today's dire circumstances, one Trump-Putin summit cannot eliminate the new Cold War dangers. But US-Soviet summits traditionally served three corollary purposes. They created a kind of security partnership -- not a conspiracy -- that involved each leader's limited political capital at home, which the other should recognize and not heedlessly jeopardize. They sent a clear message to the two leaders' respective national-security bureaucracies, which often did not favor détente-like cooperation, that the "boss" was determined and that they must end their foot-dragging, even sabotage. And summits, with their exalted rituals and intense coverage, usually improved the media-political environment needed to enhance cooperation amid Cold War conflicts. If a Trump-Putin summit achieves even some of those purposes, it might result in a turning away from the precipice that now looms

[Jun 13, 2018] Sanction Trump not Bourbon

Highly recommended!
The term "national neoliberalism" should probably be adopted as the most succinct term for Trump economic policy
Notable quotes:
"... To paraphrase Ralph Nader, the U.S. corporate state is a two-headed beast. Sure, President Trump and the Republican Party are currently handing over public lands to oil and gas companies, eliminating net neutrality, introducing pro-corporate tax legislation, kowtowing to the military industrial complex, defunding the welfare state, and attempting to privatize education and deregulate finance. ..."
"... But let's not forget our recent Democratic presidents, for example, who are also guilty of empowering and enriching big business and disempowering and impoverishing ordinary Americans. ..."
"... In war the moral is to the material as 3 is to one, said Bonaparte. The neoliberal world order according the Bretton Woods and Washington cannot raise and apply enough material [bombings, drones, aircraft carrier intimidation THAAD in Korea are the ante] without destroying itself and in its throes the world. ..."
"... The U.S. trade deficit in goods, without services, was $810 billion. The United States exported $1.551 trillion in goods. It imported $2.361 trillion. The USA imports more than they export to: China, Japan, Canada, Germany and Mexico. USA top 5 Trade deficits: China $375 billion, Mexico $71, Japan $69, Germany $65, and Canada 18 billion. ..."
Jun 10, 2018 | angrybearblog.com
likbez, June 10, 2018 2:26 am

Trump behavior at Canadian G7 meeting was boorish, but it is logical and is consistent which his previous stance on globalization: he rejects neoliberal globalization.

Sasha Breger Bush proposed the term "national neoliberalism" to depict the transition from "classic neoliberalism" which has been started with the election of Trump.

I think the term really catches the essence of the election of Trump. and should probably be adopted as a succinct description of Trump economic policy.

The nationalism, xenophobia, isolationism, and paranoia of Donald Trump are about to replace the significantly more cosmopolitan outlook of his post-WWII predecessors. While Trump is decidedly pro-business and pro-market, he most certainly does not see himself as a global citizen.

Nor does he intend to maintain the United States' extensive global footprint or its relatively open trading network. In other words, while neoliberalism is not dead, it is being transformed into a geographically more fragmented and localized system (this is not only about the US election, but also about rising levels of global protectionism and Brexit, among other anti-globalization trends around the world).

I expect that the geographic extent of the US economy in the coming years will coincide with the new landscape of U.S. allies and enemies, as defined by Donald Trump and his administration.

See https://www.commondreams.org/views/2016/12/24/trump-and-national-neoliberalism

He elaborated on this in his more recent article ( http://www.dollarsandsense.org/archives/2018/0118breger-bush.html )

But if we take seriously the idea that Trump is a consequence of the disintegration of American democracy rather than the cause of it, this "blame game" becomes especially problematic.

Partisan bickering, with one party constantly pointing to the other as responsible for the country's ills, covers up the fact that Democrats and Republicans alike have presided over the consolidation of corporate power in the United States.

To paraphrase Ralph Nader, the U.S. corporate state is a two-headed beast. Sure, President Trump and the Republican Party are currently handing over public lands to oil and gas companies, eliminating net neutrality, introducing pro-corporate tax legislation, kowtowing to the military industrial complex, defunding the welfare state, and attempting to privatize education and deregulate finance.

But let's not forget our recent Democratic presidents, for example, who are also guilty of empowering and enriching big business and disempowering and impoverishing ordinary Americans.

JackD, June 10, 2018 9:58 am

@Likbez: "Sure, President Trump, etc" is your important sentence. It is the immediate need. First things, first.

ilsm, June 10, 2018 3:12 pm

In war the moral is to the material as 3 is to one, said Bonaparte. The neoliberal world order according the Bretton Woods and Washington cannot raise and apply enough material [bombings, drones, aircraft carrier intimidation THAAD in Korea are the ante] without destroying itself and in its throes the world.

Trump is not tearing apart NATO anyone not earning money is a PNAC think tanks knows NATO has become an aggression against Russia with similar intent as Hitler.

Grabbing Sevastopol and aiding Russians in territory occupied by Kyiv are [bold] defensive moves. The threat of Chinese islands in the South China Sea is the US Navy super carriers intimidations has no career raiding Hainan.

rps, June 10, 2018 7:42 pm

I was curious if Yglesias is a Canadian since his editorial sided with the G7 leaders stance against Trump's fair-trade often labelled as 'protectionism' of USA industries. He's a New Yorker as I pondered what's his stake in this political tirade against Trump's pro-America versus anti-globalist policies?

It appears that the media has glided over the fact Trump had suggested to the other G7 leaders that all trade barriers, including tariffs and subsidies, be eliminated, ""You go tariff-free, you go barrier-free, you go subsidy free." Protectionist Canadian PM Trudeau howled at a press conference after Trump had left on his way to Singapore. Why? Is it because Trudeau is committed to the welfare of Canadians and their industries? How dare the president of the USA- in turn, advocate for citizenry and country as does his G7 counterparts for their countries.

The U.S. trade deficit in goods, without services, was $810 billion. The United States exported $1.551 trillion in goods. It imported $2.361 trillion. The USA imports more than they export to: China, Japan, Canada, Germany and Mexico. USA top 5 Trade deficits: China $375 billion, Mexico $71, Japan $69, Germany $65, and Canada 18 billion.

More fun & facts:

US citizens and their jobs were swindled with cheaper foreign goods flooding American businesses and stores as good manufacturing jobs headed overseas. Jobs that created the middle class and all their earned benefits and standard of living decreased/disappeared quickly with NAFTA and the WTO.

Concisely, trade deficits destroyed the middle class, the working class, blue collar, and in turn, increased poverty and homelessness. Destroyed small town anywhere in the USA with manufacturing and jobs fleeing overseas in search of cheap labor. Go travel across the USA and see the boarded up towns, walk the streets of Flint Michigan, Detroit, Martinsville Virginia, Gary Indiana, Freeport Il, etc. Throw a dart at a USA map and you'll hit a town devastated by 'free' to lose your job trade. In 2014, 2.3 million job losses due to trade with China. Job losses in the millions have been slowly replaced with 'service' jobs and/or $8.00 an hour part-time no benefits workers as the new norm.

Remember when Walmart's original slogan was "Buy American"? Sam Walton before he died, was big on "Buy American," and it appeared in signs in the stores and on TV ads. His heirs quickly changed it to "Buy Chinese" destroying the american dream and small town USA.

Yet Yglesias' preference is all for the unbalanced trade with our G7 frenemies and punishing a president who chooses fair trade practices to ensure US jobs for American citizens. Makes me wonder who or what Yglesias truly advocates for, the NWO or the country of origin on his passport?

"What we must do is this: revise our tariff on the basis of a reciprocal exchange of goods, allowing other Nations to buy and to pay for our goods by sending us such of their goods as will not seriously throw any of our industries out of balance Such objectives as these three, restoring farmers' buying power, relief to the small banks and home-owners and a reconstructed tariff policy, are only a part of ten or a dozen vital factors. But they seem to be beyond the concern of a national administration which can think in terms only of the top of the social and economic structure. It has sought temporary relief from the top down rather than permanent relief from the bottom up. It has totally failed to plan ahead in a comprehensive way. It has waited until something has cracked and then at the last moment has sought to prevent total collapse.

It is high time to get back to fundamentals. It is high time to admit with courage that we are in the midst of an emergency at least equal to that of war. Let us mobilize to meet it." "The Forgotten Man" speech, 1937. Franklin Delano Roosevelt

Since Clinton signed NAFTA in 1994 and the WTO, American jobs and industry left our shores seeking the lowest common denominator- cheap slave labor. To paraphrase FDR into the late 20th and early 21st century, "Clinton and his successors concern of their national administrations thought in terms only of the top of the social and economic structure. It has sought temporary relief from the top down rather than permanent relief from the bottom up.It has totally failed to plan ahead in a comprehensive way."

Bruce Webb, June 10, 2018 9:16 pm

Nothing personally Rps, but you do not get Triffin Dilemma and global reserve currency. Please no more NAFTA obsession when no jobs left with that deal and exports excelerated. The global reserve currency and booming financial markets create a surplus in services over goods. It also creates the need for a goods deficit to stabilize the financial system. You cannot wave a wand and cure something that cannot be cured. You need a major depression to rebalance and drive capital from america.

Bruce Webb, June 10, 2018 9:19 pm

Likbez, Neoliberalism IS American. Trump is pro-East Asia

[Jun 13, 2018] NEO - Jacksonian Trump and the Root of Global Evil by Gordon Duff

Notable quotes:
"... Gordon Duff is a Marine combat veteran of the Vietnam War that has worked on veterans and POW issues for decades and consulted with governments challenged by security issues. He's a senior editor and chairman of the board of Veterans Today , especially for the online magazine " New Eastern Outlook ." ..."
June 6, 2018 | journal-neo.org

The Trump phenomenon, to paraphrase Lincoln, who may not have said this at all, "you can fool some of the people all of the time," deeply parallels the elections of 1824 and 1828. This is when consummate "outsider," a tough-as-nails backwoods "westerner" and war hero, Andrew Jackson, spouting conspiracy theories about corruption and "elites" rose to the presidency.

Trump advisor Steve Bannon actually studied Jackson and his rise to prominence, followed by a checkered presidency of broken treaties and violent retribution against his personal enemies.

Both Trump and Jackson brought first ladies to the White House with "deeply singed" reputations.

This is where the comparison ends. Jackson typically settled his personal grudges with a pistol or sword, not his mouth or lawyers. He warred on the Rothschilds' agents and their national bank set up by Federalist Alexander Hamilton.

Above all, Jackson was the "real deal," opposing elites who were then as they are today, utterly corrupt. Trump is certainly not the "real deal," not with a cabinet of the "worst of the worst" of corrupt elites and policies and appointments intended to stifle democratic institutions.

The Central Banks

The Fed

Trump's court appointments , rushed through congress, most unvetted and unqualified, dark histories of personal bias and corruption, many young enough to serve for decades, are intended to protect and serve the corrupt elites from public scrutiny and any legal process.

At the root of it all, in America as with America's NATO allies, are the central banks that date back centuries.

Jackson, in 1833, shut down the bank run by Nicholas Biddle and backed by powerful "bought and paid for" Senator Henry Clay. Jackson did so defending the constitution which clearly prohibited a central bank which the founding fathers recognized as the root cause of Europe's continual wars.

A year later, in 1834, congress censured Jackson for abusing presidential power. His congress was "owned" by Biddle and his European masters.

Today, we have a "dime store" Jackson, someone with the swagger and none of the real muscle. Perhaps Trump saw another example of an American who stood against the central bank, that being John Kennedy and his fate and that of his brother Robert.

Were one to follow this vein, as to who owns and controls the central banks, and how the restoration of the central bank in 1913 re-empowered America's European masters under the Federal Reserve Act, a fuller backdrop for understanding America's crippled political scene would entail. Our focus is elsewhere, and America's own debt slavery is an important component for certain.

American Terrorism

How does the world see the US?

Increasingly , the world is terrified of America. A single nation drowning in 21 trillion dollars of bankruptcy is blackmailing the world.

America clearly can't manage its own affairs at home, a nation with a third of its citizens living in or near absolute poverty, a nation ruled by functional illiterates or faithless warmongers, yet America continues its military crusade for what it calls "justice and freedom" that its own citizens seldom see.

Sanctions, trade wars and military bullying focused on rebuilding world divides, restoring world tensions and finding adversaries where partners or friends may well have been, is the watchword of American policy. Why?

America is breaking the rules. There was always "wiggle room" in the hodge-podge of international law, room for "justified war" and a door opened for the "victor's justice" we saw at the Nuremberg and Tokyo Tribunals after World War II.

Even that is gone today, and America's domestic political meltdown is largely responsible.

Were one to look to the roots, even before Machiavelli, one might turn to Sun Tzu. In his Art of War, Sun Tzu advised a combatant to always build a golden bridge for a retreating enemy. In the world of nuclear brinksmanship, this might be more aptly be expressed as a lesson most learned as children on the school playing fields.

Never humiliate a potential adversary.

Background

Unrest in US

At one time , Americans themselves were politically astute, at least an activist core, including up to 40 million union members when they held sway over politics.

At one time, the primary concern of Americans was economics, the day to day issues of job security, rising prices and economic survival for the family.

Demagogues would drum beat about the dangers of communism or the threat of drugs. Hollywood would depict, almost continually, a Soviet occupation of America, films like Red Dawn or even, jokingly, The Russians are Coming, The Russians Are Coming. No sane person took it seriously

However, as most recognize, sanity isn't now nor may ever have been the strong suit for many Americans.

Why Things Are Different

Depiction of Andrew Jackson at Battle of New Orleans

America was always strife with racial, religious and class differences. What few recognize is the regionalism that was initially expressed in the political aspirations of Andrew Jackson, America's first populist "outsider."

From the Atlantic, November 2016:

"Newt Gingrich has compared Trump to Jackson for some time. Rudolph Giuliani declared on election night that it was 'like Andrew Jackson's victory. This is the people beating the establishment.' That may seem a comforting comparison, since it locates Donald Trump in the American experience and makes his election seem less of a departure.

Is Trump's victory really like Jackson's? On the surface, yes: In 1828, an 'outsider' candidate appealed directly to the people against elites he called corrupt. A deeper look at Jackson's victory complicates the comparison, but still says much about America then and now.

Jackson's road to victory began with a defeat. He was a Tennessee politician and plantation owner turned soldier, a man who, unlike Trump, had deep experience in government. As a general, he became the greatest hero of the War of 1812, and capitalized on his fame by running for president in 1824. But the electoral votes were split between four candidates. The presidency was decided by the House of Representatives, which chose John Quincy Adams, the highly qualified secretary of state.

1833 Democratic cartoon shows Jackson destroying the "Devil's Bank" (Photo credit, Wikipedia)

Jackson politely congratulated the winner but was seething. He soon declared the system was rigged. The Jacksonians' phrase was 'bargain and corruption' -- they said the House speaker, Henry Clay, had thrown the vote in exchange for being named secretary of state.

This conspiracy theory added an element of rage to Jackson's basic argument that he was simply owed the presidency. Although the House had voted in accordance with the Constitution, Jackson insisted that he should have automatically won because 'the majority' of the people supported him. (He'd actually won a plurality of the popular vote, 40 percent, which was politically significant but had no legal bearing.)

With an eye to the next election, he set out to upend the political system, which had been running predictably for a generation. A party founded by Thomas Jefferson had installed four consecutive presidents. Most elections were not even close. Relatively few people voted, and many lacked voting rights. But the franchise was expanding to include all white men, and boisterous new political forces were sweeping the growing nation.

Jackson and his allies spent four years building a popular movement in favor of majority rule. They worked to delegitimize President Adams, promoting the "corrupt bargain" conspiracy theory and blocking his programs in Congress. In their 1828 rematch, Jackson defeated Adams in a landslide. His 1829 inauguration was recorded as a triumph of the people, who mobbed the White House in such numbers that they trashed it. It's this moment to which Giuliani referred on election night 2016."

Defining the Problem

War is a racket and a habit. (Four Horsemen of Apocalypse, by Viktor Vasnetsov, 1887)

In using "Jacksonesque" methods without Jackson, the man, with his own experiences and moral center as a balance, Bannon and Trump, now Trump with Bolton and Giuliani, personify not just corruption. The world is seeing a darkness unleashed, an America wielded as a sword for globalist forces.

What is different today is that forces that reined in the "globalist cabal," for lack of another term acceptable for publication, no longer exist.

The formula used to take America to war time and time again, 1898 with Spain or the two wars with Germany, jingoism, black propaganda, false flag terrorism, seen again on 9/11, has its limitations. When the US went to full scale war in Vietnam, justified by the Tonkin Gulf incident, reputedly a false flag attack on the US Navy by imaginary North Vietnamese patrol boats, the public eventually rose in relative "unison," to stop the war.

Most of these real men are now lost to the ages, prematurely dead from war toxin spray. How we miss their race.

Eventually, under the Clinton presidency, America had not only largely demilitarized, but had also entered into a series of treaties limiting strategic nuclear capabilities. The end result was a pay down on the national debt and an impeachment attempt against Clinton.

The false flag event that drove the fragile, drugged American psyche over the cliff

This was followed by the rigged election of 2000, then 9/11, then abrogated treaties, ten trillion in new debt, police state legislation, near total military rule and a permanent war footing.

What was different, what separated America of 1965-1970 and America of 2000?

The unions were gone and with them the political leaders who answered to the working class that fought the wars and paid the bills.

Campaign finance legislation was erased by a biased Supreme Court under Citizens United v. US in 2005.

Corporate control of media was complete.

Ragtag extremist billionaires, the Koch's, Adelson, Scaife, DeVos, Coors and a series of offshore "oligarchs" bought congress, as had been done during the Jackson presidency nearly two centuries before.

Then there is the internet. Where Jackson's electoral environment included limited suffrage, men only, property owners only, voting only by the few, the larger electorate of the 21st century were subject to advanced manipulation and thought control, real not imaginary, through social media.

In fact, two realities had been created, perhaps even more, separate worlds for each recognized and identified "type," based on psychological triggers. Think tanks and major military and intelligence contracting firms received and continue to receive billions to study and tune capabilities, not just altering opinions but further, altering the ability to perceive and judge.

Thus, when Jackson stood against congress, he had the support of the people, the frontiersmen, the farmers, the working classes, people now "chasing their own tails" at the behest of "fake everything."

Conclusion

What we are left with is an America capable of targeting any nation, capable of capriciousness unimagined by those who see it, who suffer it, those who assume rationality exists though not evidenced.

It was Baudelaire (1864, Le Joueur Genereaux):

"la plus belle des ruses du diable est de vous persuader qu'il n'existe pas!" (the most beautiful trick of the devil is to persuade you that he does not exist!)

Again we return to the issue of the unasked question of "why?" We know who, we know what, but as the question of "why" is never asked, then we are then faced with another question, more basic, more telling. Why are we afraid to ask a question? Why do we choose to turn away from what we know to be the presence of pervasive evil itself as a prime motivator?

Gordon Duff is a Marine combat veteran of the Vietnam War that has worked on veterans and POW issues for decades and consulted with governments challenged by security issues. He's a senior editor and chairman of the board of Veterans Today , especially for the online magazine " New Eastern Outlook ."

SOURCE New Eastern Outlook, Moscow

[Jun 10, 2018] The Battle for Money Has Begun naked capitalism

Notable quotes:
"... If Money=Debt, the battle over money can only be won by individuals wisely choosing whom they become indebted too. As the wise Michael Hudson points out, "Debts that can't be paid, won't be paid." ..."
"... Money is the creation of the elite to control the rest of the masses. It screws the rest of the masses by constraining what they can get their hands on while the elite can get their hands on anything they want. ..."
"... IMO the point of the article was to hint that objections (or refusal to engage with) MMT is largely political in nature. ..."
"... Skippy said it above: these are likely bad faith actors who disguise their classism and political desires with talk of "positive money" and the like. Debate clubs won't win this one. ..."
"... As I understand it, MMT is simply a more honest way of explaining the current reality, the problem being that the 1% would like to keep that a secret so that money is only created for the things that they can profit from, like war. ..."
"... MMT necessarily requires the exorbitant privilege of having the US dollar accounting for 60% of world trade & financial transactions with the US economy representing only 20% of world GDP. ..."
"... The Entrepreneurial State ..."
"... money and credit are used almost entirely for speculation, usury, and rent extraction ..."
"... In a normal economy, government spending is financed by taxes and borrowing, meaning that no new spending power has been created, as IS the case with new bank loans. ..."
"... You can fool part of the people all of the time, and all of the people part of the time. ..."
"... handing all credit creation to the central banks is not only technically impossible in a modern economy, it's a dangerous folly ..."
"... Wealth, Virtual Wealth and Debt, 2nd edition. ..."
"... The Order of Time ..."
"... "The debts are owed to government banks. A government can do what the U.S. can't do. The government can forgive debts, at least those that are owed to itself, without creating a political backlash. If a viable corporation has run up too much debt, the government can forgive it. This is better than letting the debt close down a factory or force it be sold to a predatory asset management firm as occurs in the United States. That is the advantage of having public credit and why credit should be public. That's how it was in Babylonia. Rulers were able to cancel debts all the time in the 3rd millennium and 2nd millennium BC, because most debts were owed to the palace or the temples. Rulers were cancelling debts owed to themselves. ..."
"... China can cancel business debt owed to itself. It can proclaim a clean slate. It can minimize debt service to whatever it chooses. But imagine if Chase Manhattan and Goldman Sachs are let in. It would be much harder for the government to raise real estate taxes leading to defaults on the banks. It could save the occupants by making new loans to those who default – based on lower land prices. ..."
"... Well, you can imagine the international furor that would erupt. Trump would threaten to atom bomb Peking and Shanghai to save his constituency. His constituency and that of the Democrats are the same: Wall Street and the One Percent. So China may lose its ability to write down debts if it lets in foreign banks." ..."
"... that this is a Chicago School / Friedmanesque monetary policy is made clear by Positive Money ..."
"... It seems there are greater similarities between China and the US than may be visible at first glance. China builds real estate for a shrinking population, invests for an over-indebted client (the US, which even insists on a drastic reduction of the bilateral trade deficit) and finances all this with money it does not have ..."
Jun 10, 2018 | www.nakedcapitalism.com

Disturbed Voter , June 8, 2018 at 6:30 am

Perhaps the cost of the 2008/2009 bailout was too high? And I don't mean quantitively. It seems modern man has no sense of the qualitative.

Odysseus , June 8, 2018 at 5:22 pm

The same money that went into TARP would have bought a whole lot of nonperforming mortgages. You wouldn't have needed a large bailout if the money actually made it's way to main street.

PlutoniumKun , June 8, 2018 at 6:32 am

Slightly off-topic, but if its true that this is a right wing proposal using naïve left/Green supporters to give a progressive fig leaf, it wouldn't be the first time this has happened. You can see the same phenomenon with Brexit, where many supposed left wingers have often bought unthinkingly into many right/libertarian memes about 'freedom' from the EU. The core reason they could do this is the effective abandonment by the left of arguments about money and capital to the conservative and libertarian right from the 1980's onward.

One of the many reasons I love NC so much is that it has tried to fill the gap left by so much of the mainstream left and much of the Greens in analysing economics issues in forensic technical detail. Articles like this are absolutely invaluable in building up a proper intellectual program in understanding the central importance of macroeconomics in building a fairer society.

Watt4Bob , June 8, 2018 at 8:08 am

God, country, apple pie, balanced budget, freedom, democracy, pay-as-you-go, ingredients in the hash of right/libertarian memes, all supposedly 'common sense' but actually nonsense, spread thick, intended to distract us while our ruling class steals everything not tied down.

I think the left saw its audience washed away by a tidal wave of this clever, well-funded nonsense, so they stopped arguing about money and capital because they found it embarrassing to be caught talking to themselves.

Of course back in the 1970s, much of the working-class had was doing well enough that they thought the argument about money had been settled, and in their favor. Little did they know that their 'betters' were planning on clawing-back every penny of wealth that they'd managed to accumulate in the post-war years.

So here we are, the working class that was formerly convinced that anyone could live well if they just worked hard, are finding that you can tug on your boot-straps with all your might, and get no where.

Morty , June 9, 2018 at 12:18 pm

I think you're right in that the wrong narrative is now dominant.

I don't think this was done intentionally – I think the people pulling the strings don't know for sure what will happen, either.

The 'common sense' you mention is the best explanation most people have available. They look at macroeconomics through the lens of their own household budget. Of course a balanced budget responsible application of money makes sense Most people don't have a money printer in their basement.

Norb , June 8, 2018 at 7:27 am

The battle is for the soul of humanity. A leadership that is working toward reducing inequality and injustice in the world will adopt policies reflecting a more positive outlook on the human condition. Those implementing austerity revile the masses of humanity, wether stated or not. The masses are to be controlled, not enlightened or cared for.

The West has gained supremacy in the world by using the strategy of Divide and Conquer. This thought process is so engrained in the psyche, that it heavily influences every form of problem solving by using outright war and financial oppression as primary tools to achieve these ends.

There would need to be a fundamental shift in thinking from Western leadership in order to bring about a change that would focus on wellbeing over profit, which does not seem forthcoming.

If Money=Debt, the battle over money can only be won by individuals wisely choosing whom they become indebted too. As the wise Michael Hudson points out, "Debts that can't be paid, won't be paid."

The main problem I see is the definition of what "Winning" would be. The definition determines the policy.

Summer , June 8, 2018 at 1:54 pm

"There would need to be a fundamental shift in thinking from Western leadership in order to bring about a change that would focus on wellbeing over profit, which does not seem forthcoming."

Akin to a religious conversion.

DHG , June 8, 2018 at 3:47 pm

Money is the creation of the elite to control the rest of the masses. It screws the rest of the masses by constraining what they can get their hands on while the elite can get their hands on anything they want. The tipping point will be when there are sufficient numbers who understand money isnt necessary to live and have nice things, it actually exists to deprive them of such.

Paul L. , June 8, 2018 at 7:58 pm

What is your alternative?

Watt4Bob , June 8, 2018 at 7:34 am

We've been fighting this same 'war' for a very long time.

Everybody now just has to make up their mind. Is money money or isn't money money. Everybody who earns it and spends it every day in order to live knows that money is money, anybody who votes it to be gathered in as taxes knows money is not money. That is what makes everybody go crazy. -Gertrude Stein – All About Money

As far as I can tell, about 1% of us believe that money is not money, and the rest of us believe that money is money.

Most of us believe that money is money because as Gertrude Stein said: Everybody who earns it and spends it every day in order to live knows that money is money

So here's the problem: the 1% of the people, the ones who believe that money is not money, are in charge of everything.

It's not natural that so few people should be in charge of so much, and that they should be in charge of 'everything' is truly crazy. (Please excuse the slight digression)

The people who are in charge of everything believe that it's right, proper, indeed 'natural' that they be in charge of everything because they believe that no one could do as good a job of being in charge of everything because they think they are smarter than everybody else.

The reason that the 1% of people believe they are smarter than everybody else is rooted largely in what they believe is their self-evident, superior understanding of money; that is to say, the understanding that money is not money.

The trouble is, the difference between the 1%'s understanding of money, and the common man's understanding of money is not evidence of the 1%'s superior intellect, so much as of their lack of a moral compass and their ability to rationalize the depraved indifference they show to their fellow man.

Read more;

Watt4Bob FDL June 2014

perpetualWAR , June 8, 2018 at 10:32 am

I don't believe money is money. Pretty certain I am in the 99%. "Money" or currency says right on the face that it is a debt instrument.

Samuel Conner , June 8, 2018 at 7:54 am

Maybe this thought is callous, but perhaps it would be useful to have a real-world demonstration that this is a bad idea. How systemically important is the Swiss economy? US abandoned its monetarist "quantity of reserves" experiment after a relatively short time. Again, it sounds callous, but perhaps a year or two of distress in a small test environment

(that is starting from a pretty good place and has a good social safety net

http://siteresources.worldbank.org/SAFETYNETSANDTRANSFERS/Resources/281945-1124119303499/SSNPrimerNote25.pdf

)

would be helpful to the world at large in terms of deprecating a bad idea. Perhaps MMT will be the last approach standing?

Could it be that Wolf's "we need experiments" rhetoric is actually opposed to "positive money", but he recognizes that the idea won't go away until it is badly spanked? Even if not, maybe there is something to the idea that experimentation could be used to distinguish bad ideas from less bad (the good ideas won't be tested, I reckon, until all the various flavors of "bad" have been tried and rejected).

TroyMcClure , June 8, 2018 at 8:11 am

IMO the point of the article was to hint that objections (or refusal to engage with) MMT is largely political in nature. See Marriner Eccles and his observation regarding the political enemies of full employment.

Skippy said it above: these are likely bad faith actors who disguise their classism and political desires with talk of "positive money" and the like. Debate clubs won't win this one.

If the Swiss go through with it and it inevitably fails there will always be an excuse. They didn't do positive money "hard enough" or whatever.

liam , June 8, 2018 at 10:22 am

What I'd like to know is if the Swiss go through with it and it fails, is there anything other than central bank independence that needs to be changed? Fundamentally it's still fiat, operating within a democracy. Does it not come down to who decides how much and for what purpose?

Maybe I'm missing something, but it strikes me as the elites getting their revenge in first. There go my people and all that. Maybe I am missing it.

Watt4Bob , June 8, 2018 at 8:18 am

the good ideas won't be tested, I reckon, until all the various flavors of "bad" have been tried and rejected.

So, you don't think current conditions are convincing enough?

As for me, I'm more than convinced, that left to themselves, our elites have an endless bag of bad ideas, and every one of them results in their further enrichment at our expense.

Samuel Conner , June 8, 2018 at 9:57 am

I'm convinced; have been persuaded that MMT is the right way to think about "money" since shortly after I encountered it almost a decade ago.

As I understand it, this is a referendum. If the people don't like the outcome, they presumably would have power to reverse it. Throw the bastards out and replace with new bastards who will try something different.

Watt4Bob , June 8, 2018 at 1:19 pm

As I understand it, MMT is simply a more honest way of explaining the current reality, the problem being that the 1% would like to keep that a secret so that money is only created for the things that they can profit from, like war.

So the issue is that since enough money can be created for the needs of the rest of us, why is that not happening?

It would appear to me that almost any efforts by the 1% to create a 'new' plan is in reality, an effort to make sure that the 99% never reap any advantage even if we were to unanimously come to understand the MMT is really the most realistic perspective.

It's almost as if the 1% has decided to change the rules because the rest of us are starting to understand that there is no technical reason we can't finance a more equitable economy.

MyLessThanPrimeBeef , June 8, 2018 at 2:03 pm

It's good to explain the current reality more honestly.

Even more honestly would be to explain that reality, which is a man-made system, doesn't have to be that way, unlike scientific explanations, for example, one for how gravity works. That particular physics explanation comes with the understanding that we can't change how gravity works.

The word 'theory' in the sense most people with more than 10 years of education associate with it is that

1. You will fail to advance to the next grade, or the next class if you don't understand it.
2. If you don't understand it, you are under pressure to show you agree with the theory, lest you fail the exam.
3. The reality described by the theory is unalterable, which is often the case with natural science theories, but not really the case with social/economic/political theories, unless they deal with human nature, which is hard to change.

If I say there is a theory to explain that on Mars, you drive on the right side of the road on odd-numbered days, and on the left side on even-numbered days, you would say, I appreciate the clear explanation of your wonderful theory, but I don't like it, I don't like how that system is designed. And I want to change it!!!!!!!!!!!!

bruce wilder , June 8, 2018 at 7:03 pm

Yesterday, I watched one of many Mark Blyth videos on YouTube where he was talking about why people hold on to stupid economic ideas. He offered a variety of interesting hypotheses, most of which were not necessarily mutually exclusive.

Even a theory that fails basic tests of correspondence with reality -- neoclassical economics being the prime example -- may prove to be a reliable means of coordinating behavior on a huge scale. That we indoctrinate people in colleges and business schools in neoclassical economics has been the foundation for neoliberal politics; even if the theory is largely rubbish by any scientific standard, the rhetorical engine is easy to operate once you have a few basic concepts down. And, immunity to evidence or critical reason may actually be politically advantageous.

Econ 101 is taught as a dogma. The student is under pressure to learn the answers for the exam, as you say. All the rhetorical tropes -- not just deficit hysteria, but regulatory burdens, tax incentives, "free markets" (you see many actual markets? no, I didn't think so) and on and on -- are as easy to recite mindlessly as it is to ride a bicycle.

We have an ideology that prevents thinking or even seeing, collectively.

Paul L. , June 8, 2018 at 8:34 pm

Well, your wish has been answered – about 160 years ago. Lincoln's issuance of Greenback's allowed the Union Army to exist. No borrowing, no MMT debt incurred.

Alejandro , June 9, 2018 at 1:06 pm

Why were they accepted as payment?

Yves Smith Post author , June 9, 2018 at 9:43 pm

"MMT debt" is a non-sequitur..

MMT experts point out regularly that the Federal government spends out of nothing. Issuing bonds is a political holdover from the Gold Standard era, but separately, those bonds do have some use because a lot of investors like holding a risk free asset.

The government spends by the Fed debiting the Treasury's account. That's it.

We don't go around worrying about issuing bonds to pay for the next bombing run in the Middle East. The US has all sort of official off budget activity as well as unofficial (why do you think the DoD is not able to account for $21 trillion of spending over time? No one points out this $21 trillion mystery is proof the USG actually runs on MMT principles).

Older & Wiser , June 9, 2018 at 10:58 pm

MMT necessarily requires the exorbitant privilege of having the US dollar accounting for 60% of world trade & financial transactions with the US economy representing only 20% of world GDP.

Such impunity is changing as we speak so for that reason only (there are others) MMT should soon find itself non-viable.

Yves Smith Post author , June 10, 2018 at 1:08 am

That is not correct. Any government that issues its own currency is a sovereign currency issuer and operates on MMT principles. Canada, Japan, England, Australia, New Zealand .the constraint on their ability to run deficits is inflation. They will never go bankrupt in their own currencies. They can create too much inflation.

Adam1 , June 8, 2018 at 8:17 am

I have the same reaction to Positive Money ideas as I do to someone who talks about "parallel currencies". They don't understand money, banking and central banking.

While I agree whole heartedly with Clive that establishing the mini-bot currency is subject to the law of un-intended consequences and would no doubtedly have a bumpy start and might not even survive; but it's just another currency. Yes it would likely be subject to a discount versus the Euro, but so what. From a banking perspective there is nothing magical about state money or central bank money. These are the dominate means of clearing and settling payments today, but that's because it's currently cheaper, easier and less risky. But banking predates central banks by at least one or two hundred years (if not more). Thinking that if you put an iron fist on the usage of state/central bank money is going to stop banking only shows you don't understand banking. Most economies already have dual currencies – state money and bank money – but nobody thinks of them that way because they trade one for one. But locking the banking system out of using state money to clear and settle payments created by lending only forces the banking system to find a new means of acquiring liabilities (I'd suspect they get called something other than "deposits" of course) and clearing and settling payments. It wouldn't happen overnight but it most certainly would happen – there's too much "money" to be made.

Paul L. , June 8, 2018 at 8:36 pm

"Most economies already have dual currencies – state money and bank money" Give me the ratio please. Other than feeding the parking meter or doing your laundry what else do you use state money for?

Alejando , June 9, 2018 at 1:10 pm

Paying taxes. Unpaid parking tickets are debts, no borrowing involved.

voteforno6 , June 8, 2018 at 8:40 am

It's not exactly the gold standard, but it would have the same impact, I think. You have to give them credit, though – they keep finding new ways to dress up this very old idea.

OpenThePodBayDoorsHAL , June 8, 2018 at 7:16 pm

Hard to get to a new answer if you don't even start with the right question.
Wolf asserts his obvious and unquestionable truth: "Money is debt".

Really?

J. P. Morgan didn't think so. When he was asked:

"But the basis of banking is credit, is it not?" , Morgan replied:
"Not always. That is an evidence of banking, but it is not the money itself. Money is gold, and nothing else" .

Ah yes, the shiny rare metal that served mankind as money for millennia.
I have a gold coin in my hand. I can exchange it for goods and services. But I can't for the life of me figure out whose debt it is.

And no less than The Maestro (Alan Greenspan) opined the following last month:

"The gold standard was operating at its peak in the late 19th and early 20th centuries, a period of extraordinary global prosperity, characterised by firming productivity growth and very little inflation.

But today, there is a widespread view that the 19th century gold standard didn't work. I think that's like wearing the wrong size shoes and saying the shoes are uncomfortable! It wasn't the gold standard that failed; it was politics. World War I disabled the fixed exchange rate parities and no country wanted to be exposed to the humiliation of having a lesser exchange rate against the US dollar than it enjoyed in 1913.

Britain, for example, chose to return to the gold standard in 1925 at the same exchange rate it had in 1913 relative to the US dollar (US$4.86 per pound sterling). That was a monumental error by Winston Churchill, then Chancellor of the Exchequer. It induced a severe deflation for Britain in the late 1920s, and the Bank of England had to default in 1931. It wasn't the gold standard that wasn't functioning; it was these pre-war parities that didn't work.

Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today we would not have reached the situation in which we now find ourselves. We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line."

So let's start with a simpler definition of money: "Money stores labor so it can be transported across space and time" .

I grew some wheat, and want to store my wheat-labor so I can use it later, or spend it somewhere that is nowhere near my wheat pile.

But this points out why money that took no labor to produce cannot reliably store labor. Our system materializes money from thin air. Which is precisely the point of gold: it takes alot of labor to produce, so it has reliably stored labor for centuries. In A.D. 250 if I wanted a good-quality men's costume (toga, sash, sandals) the cost was one ounce of gold. Today one ounce of gold is +/-$1300, probably enough for a pretty good suit and pair of shoes. That fact is incredible: every other currency, money, government, and country have come and gone in the interim but gold reliably stored labor across the ages.

Cue the haters: "But gold money allows deadly deflation!!!". Yes, that scourge, when people benefit from rising productivity (lower costs of goods and services) in what used to be termed "Progress". Instead we're supposed to love being on a debt treadmill where everything costs more every year, on purpose .

https://mises.org/library/deflating-deflation-myth

Free your mind.

OpenThePodBayDoorsHAL , June 8, 2018 at 7:21 pm

Just to be clear, I'm not arguing that credit should somehow be abolished. Credit is critical, and hence so is banking. But separating money and credit would mean that every banking crisis (extending too much credit) is not automatically also a monetary crisis, affecting everyone, including people who had nothing to do with extending or accepting too much debt.

Paul L. , June 8, 2018 at 8:39 pm

Yes, you are correct. No one in the monetary reform movement wants to abolish credit – an agreement between two entities – but to have that "credit" backed by the US government as real money – what a racket!

skippy , June 9, 2018 at 3:02 am

Sigh no such thingy as "real" money, same issue with using terms like "natural" as a quantifier.

This also applies to say pods above statement about "freeing the mind", especially when referencing Mises.org or other AET affiliates.

The Rev Kev , June 8, 2018 at 8:48 pm

Of course it should be noted that if you dig up a gold coin from two thousand years ago or even older, it still has value just for its metal content alone. It still holds value. This is never true of fiat currencies. In fact, it had never occurred to me before, but when you think about it – the history of money over the past century has been to get actual gold, gold coins, gold certificates, silver coins, etc. out of the hands of the average people and to give them pieces of paper and now plastic as substitutes. Even the coins in circulation today are only cheap remnants of coins of earlier eras that held value in itself. I would call that a remarkable achievement.

skippy , June 9, 2018 at 3:13 am

Uh .

I think you should avail yourself wrt the history of gold and how humans viewed it over time, then again you could look at say South America from an anthro observation and the social changes that occurred between Jade and Gold eras.

As far as value goes that is determined at the moment of price taking which can get blurry over time and space.

Gold was used as religious iconography for a reason imo.

Just from the stand point that gold was in one anthropological observation – a flec of gold to equal weight of wheat means the gold got its "value" from the wheat and had nothing to do with some concept of gold having intrinsic value.

The Rev Kev , June 9, 2018 at 10:51 pm

Not particularly in love with gold nor am I a gold bug. My own particular prejudice is that any money system needs an anchor that will set some sort of boundaries to its growth. Something that will not blow through the physical laws of natural growth and will acknowledge that resources can and will be exhausted by limitless credit and growth. Personally I don't care if it is gold or Electrum or Latinum or even Tribbles so long as it is something.

skippy , June 9, 2018 at 11:56 pm

Yet MMT clearly states that growth is restricted to resources full stop. So I don't understand your issues with anchor points, its right there in black and white.

Look I think there is a huge difference between informal credit [Greaber] and formal credit [institutional] and the risk factors that they present. This is also complicated by not all economies are the same e.g. steady state. In facilitating up lift [social cohesion with benefits of currant knowlage] vs putting some arbitrary limit on credit because it suits the perspective of those already with claims on wealth.

skippy , June 10, 2018 at 12:43 am

In addition I would proffer that MMT is not supply side dependent, just the opposite. Economics would be much more regional in reference to resources and how that relates to its populations needs, especially considering the democratic governance of those finite resources without making money the linchpin to how distribution is afforded.

Older & Wiser , June 8, 2018 at 9:03 pm

OpenThePodBayDoorsHAL
How dare you submit such irreverent goldbuggery ?
Your line of thought is not politically correct Sir.
Something for nothing is easier to sell and to live by, don´t you know ? as long as it lasts.
Problem is ( as HAL would say ? ) the 50 years are almost through, so it just can´t last much longer no matter how much we pussyfoot around reality.

Plenue , June 10, 2018 at 1:04 am

It has nothing to do with being 'politically incorrect'. It has to do with goldbuggery being completely ignorant of actual history and facts. It ascribes to gold attributes which it never truly had even in the West, much less globally.

Some examples from objective reality:

When the Conquistadors arrived in the 'New World', they discovered an entire continent filled with easily accessible gold and silver, and yet neither was treated by the natives as money. They were shiny trinkets. Money was cocoa beans and pieces of linen.

When the Vikings reached the Eastern Mediterranean, the Byzantines had a hard time getting them to accept gold as payment. Before that, the only 'precious' metal they had any interest in was silver.

Going eastward, in feudal Japan currency was based on rice, not precious metals. Gold and silver were used as representative tokens of large values of rice. The source of value wasn't felt to be the metal, it was what the metal represented.

If civilization were to end today, the most well off survivors aren't going to be the ones who stockpiled gold. It's going to be the ones who stockpiled food and water (and/or the weapons to protect/seize such stockpiles). Gold has exactly zero inherent value. It's a luxury item at best, in the same way fine art is. No one in the post-apocalyptic wasteland is going to be impressed by your lumps of heavy, soft metal.

There's plenty of information available from historians, archaeologists, and anthropologists (but emphatically not from mainstream economists) on the history of money. If you want to 'free your mind', you'd best start with one of these fields. Not some libertarian cesspit, where the 'intellectuals' are even more delusional than mainstream neoclassicals.

skippy , June 10, 2018 at 1:39 am

Concur.

Pespi , June 9, 2018 at 3:19 am

That all sounds very neat but is not true. Money is not a labor token, it is not a token of anything but an act of accounting.

templar99 , June 8, 2018 at 9:12 am

' Everybody needs money, that's why they call it money ' David Mamet ' Heist '

The Rev Kev , June 8, 2018 at 9:52 am

I'll probably get slammed here for this but to tell you the truth, I see no justification for the shape and character of the present money system in use around the world. In fact, I absolutely refuse to believe that There Is No Alternative. The present system is one that has evolved over the centuries and for the greater part was designed by those with wealth to either solidify or expand their wealth.
Yesterday, in a comment, I made the point that for an economic and financial system to work it has to be sustainable. Call that General Order Number One. But a survey of the present system shows a system that by its very nature is seeking to transfer the bulk majority of wealth to about 1% of the population while pushing about 90% of the population into a neo-feudal poverty. This is nothing short of self-destructive and is certainly not sustainable.
We tend to think of money as something permanent but the different currencies in existence today make up only a fraction of the currencies that have ever existed. All the rest have gone extinct. I am given to understand that when the US Federal Reserve meets, it is in a room whose walls are adorned with examples of these extinct currencies. In fact, I even own a few German Reichsmarks from the hyperinflation era of the early 1920s for an occaisional bit of perspective.
OK, maybe the Swiss referendum is being used, misused and abused but it is a sign of an arising discontent. It certainly surprises me that it was the Swiss as when I visited that country, they were the most conservative people that I have ever met as far as money was concerned. In any case, perhaps it is time that we all sat down and designed a money system from the ground up. Throw away the rule book and just take a pragmatic approach. Forget theories and justifications, just look for stuff that works.

JEHR , June 8, 2018 at 11:44 am

There is no need to "experiment" with other systems of money use: we just need to regulate the system we have but, unfortunately at present, we are in the midst of de-regulating everything–finance, environmental protections, healthcare, education, etc., and getting rid of other groups such as unions. The undermining of many (public) institutions is well on its way and I do not see it ending well. I think the rich have won this round just as they planned in the 1970's.

MyLessThanPrimeBeef , June 8, 2018 at 12:14 pm

We have to consider, think or experiment with other systems. The comment below by Anarcissie is a good start.

Anarcissie , June 8, 2018 at 11:53 am

I imagine you would want to start from value (a mental state of persons) and labor, things persons do to achieve stuff which they value. It would be convenient to have tokens which represented social agreement about value, valued stuff, and labor. The social agreement could be brought about by cooperative voluntary institutions ('credit unions') which would oversee and guarantee the issuance of tokens (debts) by members (persons). We already do this on a modest scale by writing checks, so it's not unheard-of.

If you want a system which doesn't just feed the elites, you have to create one which doesn't rely on institutions dominated by or entirely controlled by the elites, such as the government, the major corporations, large banks, and so on. You want something egalitarian, democratic, and cooperative. It's not impossible.

bruce wilder , June 8, 2018 at 6:46 pm

Indeed it is possible and has been done in the recent past.

A key insight behind credit unions, mutual insurance and savings and loans back in the day was that these institutions were loaning people their own money savings and should be run without assigning hotshot managers the dubious incentive of a profit-motive or talking up "innovation".

One of the things I object to in Richard Murphy's rhetoric and that of more careless MMT'ers is that they implicitly concede the premise that Money is usefully thought of as a quantitative thing, a pile of tokena circulating at some velocity. Financial intermediaries (and yes, Richard, they are intermediaries) do create "money" in the form of credit by matching ledger entries. For a savings and loan, which gives a mortgage to a depositor or just a checking account to a saver, this can be a key idea supporting mutual assistance in cooperative finance.

But, if you insist that the bank is "creating" a quantity of money that is then set loose to drive up house prices or some similar narrative scenario, I do not see that your storytelling is doing anyone any good.

Credit from institutions of cooperative finance -- shorn as they must be of the incentive toward usury and rent extraction -- is actually a very useful application of money, enabling people to take reasonable risks over their lifetimes. For example, to enable a young couple to form a household and buy a house and gradually build up equity in home ownership against later days. This is sensible and prosaic, a standard use of money to insure by letting a bank or similar institution help individuals or small businesses to transform the maturities of their assets and prospects, while certifying their credit. If your understanding of money does not encompass such prosaic ideas as leverage and portfolios or their application to improving the general welfare, then the "left" is up a creek without a paddle.

Paul L. , June 8, 2018 at 8:44 pm

"Financial intermediaries (and yes, Richard, they are intermediaries) do create "money" in the form of credit by matching ledger entries. "
That is NOT what is meant by the term,"intermediaries" here. The common belief is that banks merely take in a depositor's money and, as an intermediary, lend that money out. An intermediary, by definition, does not create anything. That is the accepted meaning of the term when discussing banking. You are free to use your own definition but it will lead to confusion.

bruce wilder , June 9, 2018 at 12:47 am

What is the accepted meaning of the term, "intermediary", when discussing banking?

I am unclear what definition you are referencing.

Yves Smith Post author , June 9, 2018 at 10:08 pm

You are incorrect as to how banking works, and you have also jalbroken moderation, which is grounds for banning, as is clearly stated in our Site Policies, which you did not bother to read.

Per your comments on banking, you are also engaging in agnotology, another violation of site Policies.

Banks do not intermediate. They do not lend out of existing savings. Their loans create new deposits. Not only has MMT demonstrated, and this has been confirmed empirically, but the Bank of England has endorsed this explanation as correct.

You are presenting the loanable funds fallacy, a pet idea of monetarists. It was first debunked by Keynes and later by Kaldor.

Your idea of "accepted meaning" is further confirmation you are way out of your depth here and are a textbook case of Dunning Kruger syndrome.

Anthony K Wikrent , June 8, 2018 at 9:59 am

The matter of who or what controls money is actually secondary to the matter of what money is used for. Positive Money correctly identifies the fact that under our present arrangements in the USA, UK, and most of the West, money and credit are used almost entirely for speculation, usury, and rent extraction (though they do not, so far as I know, use the terms). If "the people" somehow were able to gain control of money and credit, and money and credit continued to be used almost entirely for speculation, usury, and rent extraction, society and the people would see no net advance economically.

That's the simple overview. Allow me to lay out a couple scenarios to show why just solving the problem of who controls money and credit does not really address our most urgent problems.

For the first scenario, assume that it is right wing populists who have triumphed in the fight to seize control of money and credit. Recall that in the first and second iterations of the bank bailout proposals in USA, Congress was deluged by overwhelming public opposition to the bailout. But in the second iteration, the Democrats mostly folded, while on the Republican side, the closer you got to the Tea Party extreme, the stauncher the opposition to the bailout you found. So, under right-wing populist control, we would probably see prosecutions and imprisonment of banksters, which would likely have the intended effect of lessening rent extraction. But we would probably also see that right-wing populists are not much concerned about speculation and usury, so those would continue relatively unscathed.

More importantly, we could expect right-wing populist control to result in severe cutbacks to both government and private funding of scientific research, most especially on climate change. We would be hurried forward on our course toward climate disaster, not turned away from it.

For the second scenario, let us assume it is a left-wing populist surge that achieves control over money and credit. In this scenario, speculation and usury would be suppressed as well as rent extraction. On science, there would no doubt be a surge in funding for climate research. But I would greatly fear what left-wing populists might do to funding of space exploration and hard sciences such as the large Hadron collider at CERN. And what would happen to funding for military research programs like DARPA?

Can you imagine the implications of cutting those kinds of science programs? Try to think of doing without all the spinoffs from the NASA Apollo moon landing program and the original ARPAnet, which includes much of the capability of the miniaturized electronics in the computer, servers, modems, and routers you are now using.

The point is, that without restoring an understanding of republican (NOT capital R "R"epublican Party) statecraft, its focus on promoting the general welfare, and the understanding that promoting the general welfare ALWAYS involves identifying and promoting the leading edges of science and technology, any success in seizing control of money and credit away from bankers (whether private or central) does not necessarily result in victory. For an extended discussion of science and republicanism, see my The Higgs boson and the purpose of a republic .

MyLessThanPrimeBeef , June 8, 2018 at 10:17 am

There will always be right-wingers, left-wingers, progressives, imperialists, etc.

One or more of them will seize control.

It would seem, then, the first thing to do, is to work on human nature, and not discovering new devices for them (or us, ourselves), because we can not guarantee no harm to Nature will come from colliding high energy particles.

Lord Koos , June 8, 2018 at 2:17 pm

I don't really see the left as being anti-science, it seems to me that it's the right that wants to deny scientific findings such as climate change, etc. There are exceptions of course, such as new-age/anti-vaxers, chem-trail theorists, etc but they are a small minority, and I find it hard to envision a scenario where a leftist government would cut science funding. As it is now, many if not most scientific and technical advances have originated from what was originally military funding, including the internet we are using at this moment.

This is a model that needs to change IMHO, there is no reason that cutting-edge science has to be tied to the military, science could just as easily be funded for its own sake, without the pentagon getting the money first and then having the tech trickle down to the rest of us.

MyLessThanPrimeBeef , June 8, 2018 at 3:43 pm

I am trying to come up with some examples where technological advances were not induced or misused by warriors and/or libido, from the dawn of humanity till now.

Stone tools – misused for war.

Bronze/iron tools – the same.

The wheel – war chariots.

Writing – to lord over the illiterate

The steam engine – how the west was won with buffaloes going extinct.

Gun powder – war, and above.

The internet – surveillance and libido.

The smart phone – above.

Aspirin – that's all good .maybe the example I am looking for except I'm allergic to it.

Anthony K Wikrent , June 8, 2018 at 6:28 pm

The technology of smart phones originated almost entirely with DARPA -- see Mariana Mazzucato's The Entrepreneurial State

bruce wilder , June 8, 2018 at 6:28 pm

money and credit are used almost entirely for speculation, usury, and rent extraction

Certainly on the leading edge, that is what money and credit are used for, but "entirely"??? In the main, money remains the great lever of coordination in an economy of vastly distributed decision-making.

The forces of predation and fraud are seriously out-of-control and they use money for anti-social ends, protected by neoliberal ideology and the cluelessness of what passes for the political left. Like any normal bank robber, the banksters want the system of money to continue to work and it does continue to work, in the main, even as they play Jenga with the towering structures of finance.

Anthony K Wikrent , June 8, 2018 at 6:36 pm

Well, I did qualify it with "almost" : ). Still, in the late 1990s I found that there was around $60 (sixty dollars) of trading in financial markets (including futures and forex) for every one dollar of GDP. That compares to 1.5 to 1 in 1960. The ratio probably dropped in the aftermath of the 2007-2008 crashes, but I's be surprised if it has not surpassed 60 to 1 by now. Have mercy on me: I haven't looked at a BIS report for a few years now.

Paul L. , June 8, 2018 at 8:47 pm

Your first scenario is already in existence today, my friend. As far as the second scenario – what exactly is it that you have against democracy?

Ignacio , June 8, 2018 at 10:09 am

It is just intuitive that giving central bankers the monopoly for money creation is not a good idea

Paul L. , June 8, 2018 at 8:49 pm

So your solution is to keep it in the hands of the elite?! Please note that the "central bank" under the Vollgeld initiative is completely redefined, not a central bank at all but a government institution controlled by a democratic process.

Martin , June 9, 2018 at 12:38 am

Many banks around the world started out as state-owned and have been privatised.
I admit it is simplistic, but having a state-run not-for-profit bank being this "government institution controlled by a democratic process" has a lot of merit to me.
It would have lending guidelines to aid investment in productive endeavours, limit the risk, and have no part in the insane fringe financial transactions that brought about the GFC, and who know how many other things that have gone under the radar.
This brings all currency creation into a single place, so it needs transparency and a (proper) democratic governance.
There would probably be fewer jobs I admit, but many of these would be the top levels enjoying fat bonuses based on winning zero-sum games.
And as a final comment – should GDP include the transactions within the financial sector at all? Given the zEro-sum games involved, and the creation of losers as part of that, does it actually "produce" anything at aLL?

Yves Smith Post author , June 9, 2018 at 2:00 am

I hate to be a nay-sayer, but the reason there were once many state banks in the US and there is now only one is that they became cesspools of corruption. And having arm-wrestled with CalPERS for over four years, which is more transparent than a lot of places, good luck with getting transparency and good governance.

Jamie Walton , June 9, 2018 at 7:39 am

Good point Yves. My research revealed the same re. previous state banks.

Yves Smith Post author , June 9, 2018 at 8:24 am

Mind you, that does not mean they might not be worth trying, but the assumption that they can just be set up and will work just fine "because democracy" needs to be taken with a fistful of salt. There needs to be a ton of careful thought re governance and lots of checks (an inspector general with teeth at a minimum, we can see from CalPERS that boards are very easily captured).

Jamie Walton , June 9, 2018 at 9:52 am

Agreed. Could a public banking option run through the U.S. Post Office be a better approach (they have branches and staff everywhere already)?

Watt4Bob , June 9, 2018 at 3:56 pm

Bank of North Dakota has a fascinating history, being founded during the Progressive Era, when ND had a governor who was a member of the Nonpartisan League, a populist political party, and intended to save North Dakota's farmers and laborers from the predations of the big banks in Minneapolis and Chicago.

It remains the only state-owned bank in the country.

The populist
Nonpartisan League
remains the most successful third party in history, and had remarkable impact on politics in North Dakota and Minnesota. It merged with the Democratic Party in the 50s.

Yves Smith Post author , June 9, 2018 at 9:47 pm

Ahem, I acknowledged that. What you miss is that pretty much every other state had a state bank and they were shuttered because they became embarrassingly corrupt. The fact that past "state bank" experiments almost universally failed makes me leery of the naive view that they'll be hunky dory. They could be but the sort of cavalier attitude that they'll be inherently virtuous is the road to abuse and misconduct.

skippy , June 9, 2018 at 11:30 pm

And what did ND do as far WRT usury in being a CC tool.

Wukchumni , June 8, 2018 at 10:11 am

I was talking with my wife about DeBeers and the man-made diamonds they're selling @ 1/10th of the price of the genuine article

what if some neo-alchemist did the same thing with gold?

It would in an instant, render all of it worth $130 an ounce, on it's way to $13 an ounce.

And more importantly, take away the only real alternative to digitally produced ducats.

SubjectivObject , June 9, 2018 at 1:11 pm

allotropes
you need need natural allotropes

Jim Haygood , June 8, 2018 at 10:30 am

" Money is debt. It is only created by government spending and bank lending. " -- Richard Murphy

We've jumped through the looking glass. The former money, gold, is NOT debt. Debt-based money is ersatz, a ghastly fraud on humanity.

In a normal economy, government spending is financed by taxes and borrowing, meaning that no new spending power has been created, as IS the case with new bank loans.

Daniel Nevins' book Economics for Independent Thinkers discusses how modern economists got misled into believing the money supply governs everything, whereas earlier 19th century economists understood that bank lending is what drives expansions.

Poor Murphy, starting out with a wonky premise, only succeeds in careering into a briar patch and wrecking his bike. He should post his pratfall on YouTube.

False Solace , June 8, 2018 at 11:57 am

Fiat money can also be created without debt. That's the whole point of MMT, but it makes Haygood's head explode so he never acknowledges it (without muttering about hyperinflation, which never actually happens outside of disasters on the scale of a major war).

When the federal government spends money into existence -- which can be on the basis of a democratic agenda, in countries that have actual democracies -- there's no need for a corresponding issuance of government debt. Hence, spending power is indeed created. If the government does create debt, the bond is an asset on the ledger of whoever buys it, and the government spends the interest into existence. Which creates additional spending power for the private sector. The government can choose to, or not, collect a portion of this as taxes, which extinguishes the money. If the government collected as taxes everything it ever spent there would be no money in circulation.

> In a normal economy, government spending is financed by taxes and borrowing, meaning that no new spending power has been created, as IS the case with new bank loans.

Er, new bank loans also represent borrowing that has to be paid back. The spending power that gets created is extinguished by paying back the bank loan.

MyLessThanPrimeBeef , June 8, 2018 at 12:07 pm

the federal government spends money into existence

a

That's a choice made by the designers of the current system.

But not the only choice.

The people, for example, can be empowered (or perhaps inherit that power, on the basis of the Constitution amendment clause* that any power not given explicitly to the federal government is reserved for the people), to spend money into existence.

*The Tenth Amendment declares, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people."

Susan the other , June 8, 2018 at 11:59 am

So do you gold bugs want to dispense with double entry bookkeeping or keep it and adapt it to gold (would that entail both counterfeit money and counterfeit debt?) – gold as both credit and debt, or just what exactly? With the gold side weighing down the ledger it's gonna get wobbly. Maybe have to start a war to fix it? The fog of positive money. Really, JH, you've been the best voice against war. How do you reconcile all the social imbalance that would follow with "positive" money?

Wukchumni , June 8, 2018 at 12:03 pm

Nobody's going to willingly go back to a gold standard, it would have to come about because money via digital deceit has failed in entirety.

Jim Haygood , June 8, 2018 at 12:23 pm

Fiat money is war finance, made permanent. Even during the gold standard, governments would suspend gold convertibility during wars. Lincoln's greenbacks and the UK's suspension during WW I are noteworthy examples.

So the gold standard won't stop governments declaring national security exceptions -- they've always done so. But permanent war finance is what sustains the value-subtraction US military empire, a gross social imbalance that already plagues us by starving the US economy of investment.

Double entry bookkeeping doesn't require that every asset have an offsetting liability. A balance sheet with no liabilities is all equity on the right-hand side. It's what a bank would look like if it sold off its loan portfolio and paid off its depositors -- cash on the left side, equity on the right. If the bank then bought some gold, it would be exchanging one asset (cash) for another (gold), with no effect on the liability/equity side.

Wukchumni , June 8, 2018 at 12:30 pm

It is worth noting that the Federal government struck well over 10 million ounces of gold in coin form for use in circulation from 1861 to 1865

And the CSA?

Not one grain worth

Anthony K Wikrent , June 8, 2018 at 6:40 pm

I've gathered and read much on the greenbacks, but don't recall that very interesting data about minted gold. Any sources you might recommend?

Wukchumni , June 9, 2018 at 4:40 pm

Just look up the mintage figures, here's $20 gold coins that contain just under 1 troy oz of pure gold in content, from 1861 to 1865. You can follow links to other denominations.

There were over 8 million ounces alone in $20 gold coins struck during the Civil War, by the Union.

http://www.amergold.com/gold-news-info/gold-coin-mintages.php

Wukchumni , June 8, 2018 at 12:42 pm

p.s.

We were never on a pure gold standard, nowhere close actually.

The most common money in the land until the Federal Reserve came along, FRN's not being backed by gold?

Why, that would've been National Banknotes, which was the currency of the land from 1863 to 1935. There were over 10,000 different banks in the country that all issued their own currency with the same design, but with different names of banking institutions, etc.

https://en.wikipedia.org/wiki/National_Bank_Note

MyLessThanPrimeBeef , June 8, 2018 at 1:40 pm

Specifically, in this case:

Assets = Equity (+ zero liabilities)

The accounting identity is still good.

Susan the other , June 9, 2018 at 10:06 am

Very hard to argue with you, but I'm tripping over this: "If the bank then bought some gold, it would be exchanging one asset (cash) for another (gold) with no effect o the liability equity side." Because in my mind cash isn't an asset – it's just money – a medium of exchange and a unit of account. Where we get all messed up is when the unit of account starts to slip (due to mismanagement) and people start to demand that money become a store of value. When the value is society itself. And blablablah.

JTFaraday , June 9, 2018 at 12:52 pm

Sure, the value is society itself, I agree with this. But OTOH, it is for example much better to be a woman, black person, fill in the blank, even "working class" person with a lot of money than not in a sexist, racist, etc society.

I can't necessarily compel the forces of sexism, racism, old farts who don't agree with me, etc through the "political process," thereby bringing my will to bear on society. But I can move things with my dollars, This is how money gets its magic power. If people played nice with each other, we wouldn't need money.

Older & Wiser , June 8, 2018 at 1:03 pm

What about paper bugs Susan ?
Has paper buggery helped any ever ?
Why do fiat currencies always self-implode (in average) every 50 years ?
" You can fool part of the people all of the time, and all of the people part of the time. .."

OpenThePodBayDoorsHAL , June 8, 2018 at 7:42 pm

8 white men control > 50% of the world's wealth. Let's just keep going in that direction, to where it's down to one white guy, and with debt-based money everyone else owes him all the "money" in the world. Then we can just strangle him in the bathtub and usher in an era of peace and prosperity.

Older & Wiser , June 8, 2018 at 6:40 pm

Richard Murphy says that " handing all credit creation to the central banks is not only technically impossible in a modern economy, it's a dangerous folly "

What is QE then, Sir ?
Our "modern" economies don´t have business cycles any more, just distorting credit cycles.
There are no "markets" as such today, nor prices only interventions.
Even interest rates (the price of supposed "money" remember ?) are not priced by markets any more .

OpenThePodBayDoorsHAL , June 8, 2018 at 7:47 pm

Ask any economist or banker what they think about fixing the price of goods and services and see how they answer.

Watch their heads explode when you then ask if it's a clever idea to fix the most important price in the global economy.

Yves Smith Post author , June 9, 2018 at 9:53 pm

Help me. Gold is not money. And it does not have and never had immutable value. Even in the days of the gold standard, countries regularly devalued their currencies in gold terms. It was the money that was used for commerce, not the gold. When the US government devalued the $ in gold terms by 5%, bread at the store didn't cost more the next day, which is what your "gold is money" amounts to. It's not correct and you need to drop it.

Synoia , June 9, 2018 at 10:49 pm

I visited a gold mine for a tour onec. At the end of the tour was the gold refinery, and on the floor two ingots of gold.

They made the offer, "if you could life one with one hand, you could keep it."

I tried.

And discobered that the ingit, was

a) Pyramidal in shape so ones fingers slid off it
b) F .. heavy. 140 lb.

When you see gold "bars" being tossed around in the movies, it's complete bs. Arnold at his best coud not toss them around.

So we went an had a beer instead. Wiser, but not sadder.

Plenue , June 10, 2018 at 1:13 am

"The former money, gold, is NOT debt. Debt-based money is ersatz, a ghastly fraud on humanity."

You've been on NC for years. You have to know by now that this literally, objectively, isn't true. It just simply isn't. History and anthropology do not at all support your version of events. People like Hudson and Graeber have extensively documented where money came from. Debt and credit came first, then money as a token to measure them. We have warehouses full of the freaking Sumerian transactions tablets that show it! Money is debt, always has been.

Actually, I say you have to know this by now, but given how conspicuously absent you seem to be in the comments of Michael Hudson articles about the history of debt hosted here, maybe you just aren't reading them. Or you are and don't like what they say and how it clashes with your pre-established worldview, so you just ignore them. Though even if the latter, it's still telling how you don't even attempt to refute them. Perhaps because you can't.

steven , June 8, 2018 at 10:52 am

It's not about money; its about creating and distributing wealth. That a trivial thing like a double-entry bookkeeping operation should stand in the way of creating the wealth the world and its people need to survive is, of course, insane. But it is also insane to expect different results from turning over control of the process of money creation to a wholly owned subsidiary of governments like those of the United States and Great Britain, bent as they are on global hegemony ("full spectrum dominance") – at ANY cost.

Whether or not China and other developing nations realize it, genuine wealth creation – not money as debt creation ('finance capitalism') – is THE source of national power. It is more than a little amusing to watch the neoconservatives fret about the rise of China after having joined with their neoliberal brothers in off-shoring US and Western wealth creation potential (in what they must have thought was an oh so clever attack on Western living standards by forcing 'their' people to compete with the world's most desperate workers in a global race to the bottom so their 1% patrons would have an excuse to create more money as debt).

So long as the West remains focused on 'the price of everything and the value of nothing' (like the human potential of their own people, for example), the developing world is soon likely to have a monopoly that will put OPEC and its Middle Eastern dictators to shame. In summary this is about FAR more than just about how a few 'post-industrial' democracies create their money. The definitive work on this topic remains Soddy's Wealth, Virtual Wealth and Debt, 2nd edition.

Paul L. , June 8, 2018 at 8:57 pm

Soddy doesn't object to democratizing the money supply and turning over its creation the democratically elected government.

skippy , June 9, 2018 at 6:18 am

Soddys drama is making money a physical object when its a contract with time and space qualities,

blennylips , June 9, 2018 at 7:28 am

Just as a few days ago Carlos Rovelli, author of " The Order of Time ", has useful insights of the political significance of LSD, he has advice for this too in the same book:

The entire evolution of science would suggest that the best grammar for thinking about the world is that of change, not of permanence. Not of being, but of becoming.
We can think of the world as made up of things. Of substances. Of entities. Of something that is. Or we can think of it as made up of events. Of happenings. Of processes. Of something that occurs. Something that does not last, and that undergoes continual transformation, that is not permanent in time. The destruction of the notion of time in fundamental physics is the crumbling of the first of these two perspectives, not of the second. It is the realization of the ubiquity of impermanence, not of stasis in a motionless time.

In other (his) words:

"The world is made up of networks of kisses, not of stones."

Not bad for a physicist!

blennylips , June 9, 2018 at 8:02 am

As long as I am feting physicists, this just came over the transom from Sabine Hossenfelder of backreaction.blogspot.com fame. She's written a book, " Lost in Math " and was informed that a video trailer is customary in this situation. As the first comment there says:

"Hey, that is a GREAT statement! (And it applies to SO MUCH in life, not just physics!)

http://backreaction.blogspot.com/2018/06/video-trailer-for-lost-in-math.html

djrichard , June 8, 2018 at 10:54 am

We've all been focusing on the demand side of the Fed Reserve's liquidity pump: be it for sound business needs. Or not (pirates).

But what happens when demand for that pump disappears because everyone is over-extended? Because this is where Bernanke and Japan and the ECB have done "whatever it takes" to keep that pump from going in reverse. Because in an empire created on naked shorts (currency creation today is essentially a naked shorting process), the last thing you want is that pump to go in reverse. That's not just creative destruction. That's house-on-fire destruction.

So Bernanke et. al. have figured out how to keep that pump from going in reverse. Simply prop up asset prices, e.g. by reducing the asset float in treasuries, MBSs, etc. And it worked. Yay! Right? If you're an asset holder, you're aces. If you're not an asset holder, well you're not doing so well. In particular, if you're in that part of the economy which depends on the velocity of money. Because velocity is at a stand still. As another blogger I used to follow would say, price sans volume is not the right price. So from my perspective, Bernanke (and Japan) had to destroy their economies by replacing them with zombie economies to rescue certain players. Not just players, but playahs – the pirates that pushed us to this end-game. So the pirates are rescued. And the average joe inherits the after effects. But hey, those with 401Ks got rescued too, so it's not all bad. And since the 401Kers are competitive, they generally found safe harbor in the job market too. Yay for them.

If we were not on a debt-based monetary pump, we would not end up with a zombie economy. One which the Fed Reserve can't figure out how to solve except for creating even more demand at the debt pump, even more over extension to mask the issue only to fall back within the same trap again. From what I can tell, we are truly in a doom loop and at present I don't see any creativity in getting us out of this doom loop.

So the vollgeld initiative would ostensibly be a way to extricate an economy from that doom loop. I suspect the Swiss don't really need it as much as other nations. But why get in the way of that type of creativity?

And I would just add that supplanting the federal reserve note with a Lincoln greenback type of approach would work just as well. Even better since it gives the monetary powers to the fiscal side of the Fed Gov.

I posted a version of this last night in the previous thread. But suspect nobody is going to go to that thread anymore. So apologies for a repeat of sort. Not trying to spam.

Wukchumni , June 8, 2018 at 11:06 am

The idea of a real estate pumped perpetual notion machine, combined with essentially an interest free savings plan for the proles, persuaded them to come through and help rise all boats, and who could have figured on vacation rentals helping out housing bubble deux, the sequel.

Looking @ the real estate listings here in a vacation rental hotspot is indicative, in that there are only a few $250k-$300k homes for sale now, whereas there used to be a dozen, always.

Now, on the other hand, we're swimming in $500k to $1m homes that don't make the rental cut.

That says a lot.

Jim Haygood , June 8, 2018 at 12:36 pm

You probably read the Bernank's naive confession yesterday that fiscal stimulus "is going to hit the economy in a big way this year and next year, and then in 2020 Wile E. Coyote is going to go off the cliff."

Three hundred shocked staffers in the Eccles Building cocked their heads to the side and gasped, "He said WHAT?" So I wrote this song Technodammerung for rogue banker Ben:

He was just a Harvard hand
Workin' the QE he planned to try
The years went by

Every night when the sun goes down
Just another lonely quant in town
And rates out runnin' 'round

It's another tequila sunset
Fed's old scam still looks the same
Another frame

Wukchumni , June 8, 2018 at 12:46 pm

{imagines Bernanke working tables @ South Of The Border, and typical waiter spiel going something along these lines }

"Bienvenidos amigos, me llamo Benito, may I start you with an endless supply of chips?"

Alejandro , June 9, 2018 at 1:54 pm

Pardners in chime
proseytizing in real time
Preaching, if you can touch a dime
Why wont paper rhyme
But in their zeal and haste
And self-righteous aversion to waste
Recruit disciples in bling bling
Preaching money is a thing thing
While finger wagging the bloat
Preaching fix the rate, dont let it float
But beyond the noise
Preaching with poise
Its all about them
Their stuff, jewels and gem

Thornton Parker , June 8, 2018 at 10:58 am

Might the actions of a bank be restrained more easily by requiring all payments and stock issuances to the executives and directors be put directly into escrow accounts to be metered out in small amounts if the bank stays healthy over time? If the bank suffers major losses, the escrow accounts would be the first source of funds to make up for them. No Federal Deposit Insurance or other government payments would be made to the bank until the escrow accounts have been reduced to zero.

John , June 8, 2018 at 11:45 am

Randall Wray could be made Sec Treasury, Stephanie Melton Fed Chairman and if the plutocrats still run the rest of the political show that sets priorities, we would still be screwed. The full employment guaranteed jobs could just as easily be strip mining coal from national parks and forests as installing a national solar grid. It could be done with forced low paid labor camps that maximize rent for the plutocrats. MMT seems morally neutral on how the money is spent. For a good portion of the plutocrats, helping the poor is morally suspect .if they consider it at all. That is the larger problem than acceptance of MMT.

economicator , June 8, 2018 at 1:19 pm

Right on.

I didn't see any comment here going in depth with ideas on the binding money creation decisions with socially useful goals (saving TBTF I dont consider such a goal, except for emergency purposes), by what type of process and stakeholders – to avoid driving us toward becoming a 3rd world oligarchy.

The rest is just mechanics – but the most important thing is what is the social control and social purpose of money creation. I am sure we could do just fine even with the present system (of course since it is a MMT system), if there were some limits on speculation with asset prices, less military spending, more democratic control of enterprises, including banks, severe constraints on the FIRE sector, etc, etc.

In the end the problem of managing money well is a political problem. And not much is changing there for the better, despite a growing awareness that "we have a problem" as a society. Where are the politicians that will connect the dots and take on the responsibility to fix the travesty that we have?

More questions than answers, I know. But what we need a change in politics – then banking will follow.

Pespi , June 9, 2018 at 3:34 am

This is a common fallacy, that MMT is bad because it isn't about communal barter tokens or some other thing. MMT exists to empirically describe how money works in the existing economy today. You can be any sort of ideology and embrace it, anyone can use it, just like anyone can use science, it's not inherently biased toward any ideology unlike neoclassical economics and its baked in neoliberalism. That doesn't make it bad, that just shows that it is what it purports to be, an empirical description of money in our existing economy.

You want a brand new type of currency in a whole new economy, well, start organizing your revolutionary army, because that's what that will take.

bruce wilder , June 8, 2018 at 12:42 pm

The Battle for Money -- that much, it seems to me, is true. Neoliberalism is going down, brought down by its own (unfortunate in my view) success and hubris, and one consequence, on-going, is the urgent political need to re-invent the institutions of money.

The institutional systems of monetary/payment/finance systems are always under a lot of strategic pressure: they tend to develop and evolve quickly and they do not usually last all that long -- maybe, the span of three or four human generations -- except in the collective memory of their artifacts and debris.

There's a natural human wish that it could all be made safely automatic -- taken out of corruptible hands and fixed with some technical governor. Whether you are a fan of democracy or loyal to oligarchy really doesn't take anyone very far toward devising or understanding a workable system of money.

As I said in a comment on the earlier Richard Murphy post, money is a language in which we write (hopefully) "true" fictions to paper over uncertainty. Much of what passes for a theory of money is just meta-fiction, akin to literary criticism of a particular genre or era. That is certainly true of Quantity Theory (1.0 re: gold and 2.0 Friedman). It is true of related fables, like Krugman's favorite, loanable funds.

When Murphy rejects the quantity theory of money and then turns around and talks about the need to create "enough" money, I pretty much write him off. When he embraces the Truth of MMT, I know he is hopeless.

Wukchumni , June 8, 2018 at 1:44 pm

Ideally in a battle of money

a squadron of F-35's would be pitted against a fleet of Zumwalt Class destroyers

Summer , June 8, 2018 at 2:13 pm

It's been discussed on NC before, but despite all the theories and figures, it's really a battle of values. I'm not pushing religion, just saying it has all the makings of a holy war.
(come to think of it, isn't religion a big part of the history of monetary theory?)

Mercury , June 8, 2018 at 3:46 pm

China has yet to fall under the thumb of private banks the way the west has. State still holds the reins of regulation tight and the government bank maintains a robust public sector. Michael Hudson just came back from China and has this to say:

"The debts are owed to government banks. A government can do what the U.S. can't do. The government can forgive debts, at least those that are owed to itself, without creating a political backlash. If a viable corporation has run up too much debt, the government can forgive it. This is better than letting the debt close down a factory or force it be sold to a predatory asset management firm as occurs in the United States. That is the advantage of having public credit and why credit should be public. That's how it was in Babylonia. Rulers were able to cancel debts all the time in the 3rd millennium and 2nd millennium BC, because most debts were owed to the palace or the temples. Rulers were cancelling debts owed to themselves.

China can cancel business debt owed to itself. It can proclaim a clean slate. It can minimize debt service to whatever it chooses. But imagine if Chase Manhattan and Goldman Sachs are let in. It would be much harder for the government to raise real estate taxes leading to defaults on the banks. It could save the occupants by making new loans to those who default – based on lower land prices.

Well, you can imagine the international furor that would erupt. Trump would threaten to atom bomb Peking and Shanghai to save his constituency. His constituency and that of the Democrats are the same: Wall Street and the One Percent. So China may lose its ability to write down debts if it lets in foreign banks."

http://www.unz.com/mhudson/us-vs-china-housingand-those-millennials/

There are advantages to restoring financial management to the nation-state, as former Deputy Secretary of the Treasury Frank Newman has pointed out in books and lectures. The private banks have exhausted QE to the tune of $30 trillion, none of which was invested in the industrial economy. Why blame the Swiss for wanting to be like China?

Grebo , June 8, 2018 at 5:23 pm

that this is a Chicago School / Friedmanesque monetary policy is made clear by Positive Money

The Chicago Plan of the 1930s and the unrelated Friedman suggestion of 1948 were both predicated on the false fractional reserve theory of banking. Given that individual banks create credit unrestrained by reserves those plans would not have had the desired result.

Positive Money knows this, though they do sometimes carelessly use the term 'fractional reserve banking'. They think their plan is different and, to the extent that it would actually prevent banks creating credit, it is.

It is silly to suggest that Positive Money is some Neoliberal front. Neutering the banks is the last thing Neoliberals want, and when they want something they don't bother with democratic methods like public pressure groups, they use think-tanks and lobbying.

Murphy's main complaint is about handing the 'quantity' decision to the Bank. I don't think Positive Money is wedded to that idea, it is just an attempt to defuse the 'profligate politicians' argument.

Watt4Bob , June 8, 2018 at 5:29 pm

I'm sort of disappointed in this thread.

Being that NC is the place I discovered MMT, and it's been explained and debated so for so long here, I would have expected NC readers to more broadly understand that what we have currently would work for everyone if only our masters would allow it.

IOW, it is not necessary to reinvent our system so much as insist that it be used to finance material benefits for all, as opposed to endless war, political repression and bail-outs for our criminal finance sector.

How can it be that we can we finance $trillions for war at the drop of a hat, but cannot afford to 'fix' SS, or provide universal healthcare?

It seems to me that it's a political issue, not a technical problem, or am I missing something here?

Korual , June 8, 2018 at 6:54 pm

It's the difference between nationalization and centralization. We can change policy direction or we can double down, as the Swiss are considering.

OpenThePodBayDoorsHAL , June 8, 2018 at 8:11 pm

Cui bono?
The current mission of the custodians of our "money" is to keep banks afloat. It's not to provide general benefit, or to even preserve the buying power of the scrip they issue, despite what you might hear about the supposed "dual mandate" (which is now a "triple mandate": prices, employment, and the stock market).

"Financing material benefits for all" could be a bank that extends credit to a small business. Take a look at commercial credit creation to see how well that's been going. Take a look at velocity.

The Fed gifted Citi $174 billion on a day when they could have purchased 100% of the Citi Class A common stock for $4B. This is the difference Michael Hudson points about about China: their instant ability to swap debt for equity because all banks are state-owned and because they're Communists and nobody would blink an eye .

Most interesting in The Middle Kingdom are the moves to protect the state-owned banks. They started about 18 months ago, when people were told they could only have one Tier 1 bank-linked e-commerce account. As a result 7.5 billion (with a B) accounts were closed. Next they said all payments systems (including WeChat and Alipay) must clear through a new central bank clearinghouse. Two weeks ago they said not only will everything clear through these but the actual funds will need to be transferred to the new CB account .

Ant Financial announced that in the future they would be concentrating on services to finance and e-commerce companies, and away from providing those services themselves. They even anticipate a name change, from Ant Financial to Ant Lifestyle. All this makes perfect sense: President Xi will see every financial transaction in the country, and presumably apply a Social Score filter on whether he allows it to go through. 11 million people have already been denied the right to purchase train tickets or buy a house because they spat on a sidewalk, jaywalked, or made the wrong comments on social media.

Paul L. , June 8, 2018 at 7:21 pm

Wow! We are clearly past the "First they ignore you.." stage and just on the other side of " then they ridicule you.." phase. What a basket of slurs, gross omissions of fact and outright falsehoods is this current blog post.
Anytime Milton Friedman is invoked to slur a concept developed before he was even born, should be an indicator that there is no substance to the argument against the democratization of money creation.

Thanks to the internet however, one can easily visit the Positive Money site, the American Monetary Institute and International Movement for Monetary Reform sites to see those fake progressives in action. While you're at it, go to the Vollgeld site yourself and read what those wolves in sheep's clothing are really saying instead of the creative writing displayed in the blog.

How can anyone who claims to be concerned over the excesses of capitalism prostrate themselves in front of the current banking system, the driver of capitalism as it rides off the rails.

I can't bring myself to respond to the stream of unsubstantiated assertions presented but need to remind people that banks, MUST create money first for the most creditworthy. I won't insult the readers any further by naming who that class represents. A child can see that this, by definition, must lead to the accelerating inequality we see today.

As a challenge, I ask the author to show specifically in the US code where it permits the Federal Government to spend before its accounts at the Fed are replenished either by borrowing or taxing. Stay tuned to these pages for the evidence .

Clint Ballinger , June 8, 2018 at 7:29 pm

PM just wants OMF (Overt Monetary Financing) with ZIRP and a very small horizontal money system. MMT analysis suggests OMF with ZIRP and a much more regulated horizontal system is needed. There is actually very little difference in their policy prescriptions. They just arrived at them from opposite sides of the track

http://clintballinger.edublogs.org/2017/11/02/omfg-mmtpm-get-along/

steven , June 8, 2018 at 8:43 pm

I'm sort of disappointed in this thread.

I'll second that but for different reasons. Buried not far beneath the surface of this issue (money's creation, how and how much) are hugely important issues. But the discussion never seems to get beyond everyone's favorite system for creating money. The assumption seems to run along the lines of: if we can just come up with some scheme for government or gold backed money, those who possess or produce the real wealth for that money to buy will forever be content to exchange it for the money we will forever create to pay for it. There seems to be a belief countries like China or Russia can never escape the 'dollar trap' – or if they try we can threaten and intimidate them back in line with our "full spectrum dominance" military. Money IS debt – and sooner or later those who hold it are going to want to call that debt in.

Both Positive Money and MMT appear to me to just be attempts to continue 'business as usual', operating without a real definition of wealth and trusting / hoping 'the market' will sort it out.

Paul L. , June 8, 2018 at 9:23 pm

Please explain your comment "Money IS debt". Money may represent a debt but is not debt in and of itself.

steven , June 9, 2018 at 1:24 am

Money is debt, both functionally and conceptually. This is true for most of the money used in the Main Street economy. It is created as debt – yours to a bank when you use your credit card or borrow money; the bank's to you when you deposit money with one. In its role as a medium of exchange money serves as a claim on society's goods and services, its real wealth. You don't exchange real wealth for fiat or bank-created money without the expectation you will at some future time be able to again exchange that money for real wealth at least equivalent to what you had to give up in exchange for the money originally.

Jamie Walton , June 9, 2018 at 7:48 am

Rather than a claim on wealth, money could be viewed as a representation of value. Value exchange is more like a giving/sharing economy, rather than debt-swapping. I think this psychological improvement will lead to many physical/social/environmental improvements.

Of course, in any case, people need to be willing sellers/exchangers – it's not automatic or universal; we need some freedom to choose, and the better the conditions are generally, the better the freedom we will have.

Paul L. , June 9, 2018 at 10:24 am

OK but the term, "money is debt" is used too loosely and can be very misleading. Money does not have to be issued as debt as claimed by MMT. In fact, money can first appear as equity on the government's balance sheet with no counterbalancing debt. So this concept is grossly misused to imply money must be issued as debt when, in fact, once issued it may represent a claim on the wealth of society. Proponents of MMT first make the claim that money is debt, and that the notion that money can be issued debt-free is therefore false on its face. Pretty clever. They slyly blur the distinction between the creation of money by a government and the role of that money once in the economy.

WobblyTelomeres , June 9, 2018 at 10:28 am

SOME proponents of MMT first make the claim that money is debt.

FIFY.

tegnost , June 9, 2018 at 10:33 am

How can money first appear as equity? Isn't the other side of that the deficit? Granted I am naive on these points but I thought money was a bond of zero duration.See skippy re time and space

steven , June 9, 2018 at 11:17 am

I don't believe you are

"naive on these points"

. A question for Paul: Unless it is 'privatized' is there even such a thing as 'government equity'? The way the West's financial system works nothing that can't be sold appears to have any value. What's missing from that system – and the discipline of economics (see below) – is a definition of wealth.

Paul L. , June 9, 2018 at 1:10 pm

steven –
I believe we know what wealth is – but I don't understand your claim that money needs to be privatized to be considered equity. The government declares by fiat that the money it creates can be used to purchase goods and services in the economy.

steven , June 9, 2018 at 5:11 pm

I believe we know what wealth is

I don't believe this is anywhere nearly correct. From all over the political spectrum commentators lament the lost of trillions of dollars (or euros or whatever) of wealth. At least until the effects of a financial crisis start to take hold, no physical or intellectual capital is lost. The only thing that is lost are a few zeros on some financial ledgers.

As for money as equity, you may be technically correct, i.e. the rules of accounting may permit governments to count the stacks of paper currency they print (in any case, small change in terms of the total money supply) as 'equity'. But for most of us the only thing governments possess that we would count as equity are asset classes like public infrastructure. And until the services they provide (or the assets themselves) are sold, that infrastructure would, from a business accounting standpoint, technically be 'worthless'. (that last is a question?)

tegnost , June 9, 2018 at 11:24 am

I'll add watt4bob has stated what I feel is true, which is that we have MMT right now, and it's more commonly known as socialism for the rich

Paul L. , June 9, 2018 at 1:04 pm

tegnost – There is nothing in the accounting standards that prevents the inclusion of equity on a balance sheet. If we were under the gold standard and you happened to find a nugget of gold in your back yard, are you telling me that you would have to imagine some kind of "debt" to balance your household balance sheet? When Lincoln issued the Greenbacks in the 1860's there was no bond or debt associated with it. It paid soldiers wages and goods and services during he civil war.
Just as MMT states the government isn't a household, it also isn't a commercial bank either. It has the constitutional power to coin money as needed, no debt involved.

tegnost , June 9, 2018 at 2:42 pm

presumably you bought the nugget of gold when you purchased the property and it's land use rights so it's not a virgin birth, the debt is what you purchased the land for. Maybe one of those diamonds in the outback that hardy souls find, but those may have some territorial claim as well.

Paul L. , June 9, 2018 at 3:37 pm

tegnost – If you have to go there to make your point I let others judge.

tegnost , June 9, 2018 at 5:18 pm

ok how bout I come into your yard and look for some gold?

Plenue , June 10, 2018 at 1:33 am

The gold nugget has no inherent value. It's just a lump of cold metal. It will only become valuable when you go to someone else with it and try to exchange it for something, whether it be a currency or some kind of good. And only if the other person agrees with you that it's valuable. This is fundamentally what money is: a token of social interaction. The gold becomes valuable when you go to exchange it for something else. In other words when a debt comes into play. Money is debt. Or rather, it's a measurement of debt and credit. 'Store of value' and all that econ 101 rot is so much gibberish.

Once you realize that, then a question arises: "Well, why bother with rare metals or pressed coins? If it's just a token, you could literally just take a stick and carve marks into it and it would be the same thing". Yes, exactly. Which is precisely the sort of thing we see lots of in history.

RBHoughton , June 8, 2018 at 9:15 pm

Murphy sounds like one of those indecisive chaps who dispute with everyone but have no ideas of their own. I shall ignore him. Good luck to Switzerland. They have the courage and political system to try the experiment and we will all know the result in early course.

Oregoncharles , June 8, 2018 at 11:50 pm

What am I missing? As far as I can tell, the proposal is just Modern Money with the central bank substituted for the Treasury. Yes, that makes it less democratic.

MMT is inflation-limited, too. That's how you know you've overshot your resources. In fact, MMT poses a technical problem: how do you know when you've reached resource limits, EXCEPT by observing inflation? Because without that, you have a ratchet. Of course, that's just what we have, usually, so maybe that's evidence for the theory.

"First, this puts inflation at the core of economic policy." – is a false claim. As quoted, it treats inflation as a limitation. The core is promoting adequate economic activity.

Finally, he treats "money is debt" as doctrine. he doesn't justify it and it makes little sense, ESPECIALLY in MMT. How can you pay a debt with a debt? Someone's getting cheated. MMT actually proposes free money, to a point. I've seen elaborations of the idea, but they use a very extended sense of "debt." And I don't see how it's even relevant to his overall thesis.

The Swiss are pretty conservative, so I doubt they'll pass it.

Yves Smith Post author , June 9, 2018 at 1:45 am

No, Positive Money is not remotely MMT. Wash your mouth out.

The Positive Money types want to limit the extension of credit and put it under the control of what Lambert called "a magic board," a regular gimmick from his days back in debate where someone needed to be in charge but no one wanted to think hard about who or how. In practice, a central bank would be in charge. So how democratic is that?

MMT does not fetishize money the way the Positive Money does. MMT despite having Monetary in the name is about the role of government spending in a fiat currency system. MMT argues that (as Kalekci did) that businesses have strong incentive (not wanting workers to get uppity) to keep the economy at less than full employment. So the government can and should spend to mobilize resources. And it can because its role as the currency issuer means it can never go bankrupt, it can only create too much inflation. Taxes are what contain inflation in MMT.

By contrast, the Positive Money types want to do it by limiting credit creation. And thus Murphy is correct. That means their priority is to preserve the value of financial assets, not achieve full employment.

steven , June 9, 2018 at 11:03 am

I don't believe it is accurate to say that Positive Money "fetishizes money". Irving Fisher acknowledged his debt to Frederick Soddy for the concept of "100% Money", the intellectual foundation for the Positive Money movement. Soddy's intent in limiting the creation of money to the stock of wealth available for it to purchase was to retain independence from the state in obtaining the means of subsistence. He compared the use of monetary policy to goose the economy to a merchant putting his or her finger on the scale, making it difficult to impossible for money to fulfill two of its primary functions: serving as a medium of exchange and a store of value.

So long as there was wealth available for it to purchase, he – and presumably Fisher's Positive Money crowd – would have no objection to creating as much money as needed to keep the economy running. What he and every other respectable economist have been trying to bring under control is the excess money creation fueling speculation and the seemingly inevitable boom-bust cycle accompanying the private creation of money.

Rather than curbing that excess, however, the 'solution' that seems to have been adopted is for the US and other Western governments to absorb the excess credit (money as debt) creation by taking it on their (governments') own books. Government debt is I believe called 'near money' in the financial markets. But neither the governments nor the bankers of countries that no longer create real wealth have any logical right to create the money to buy it. Just retaining the right to 'print' more money or 'near money' doesn't change that, except perhaps in an absurdly narrow legal sense.

There are, of course, some issues like globalization intimately connected with the construction of a logical and fair monetary system. But underlying them all, including for countries other than the US, is a logical definition of 'wealth':

a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science."

Frederick Soddy, WEALTH, VIRTUAL WEALTH AND DEBT, 2nd edition, p. 102
(Soddy might have added "if government is to be a science".)

skippy , June 9, 2018 at 8:12 pm

Here in lies the rub economics will never be a Science.

Firstly the medium used by most economics – philosophy – does not even have a functioning model of time and space and is prone to fads. Magnified by scale WRT elite tastes or self dealing. Wealth or Capital is also a bit complicated by say the Cambridge Controversy et al. So until some very fundamental flaws are sorted, that have nothing to do with – money – the concept of "Science of Money" is going to be a non starter.

Worst is those that use such syntax and dialectal style are going to be called into question – over it.

I mean we had political theory, then some bolted on science to it, and called it economic science. Which then begat a whole time line of dominance front running the political process regardless of political incumbents.

I think Scientists that dabble in monetary theory fall victim to the same dilemma that say religious based views do – their optics are ground before looking.

steven , June 9, 2018 at 9:55 pm

Skippy,

Probably best to start with the first part of Soddy's (actually John Ruskin's) observation, "a logical definition of wealth is absolutely needed ". "Most economics" may indeed disguise its prostitution with a veneer of philosophy or mathematics. But I don't think you can say that about Soddy's:

A definition of wealth must be based upon the nature of physical or material wealth, in the sense of the physical requisites which empower and enable human life-that is, which supply human beings with the means to live, and, as an after consequence of living, to love, think and pursue goodness, beauty and truth.p. 108

(All citations are from Soddy's Wealth, Virtual Wealth and Debt, 2nd edition- WVWD)
For that matter, according to Michael Hudson, you can not accuse the classical economists of just dabbling in philosophy. They were ALL about freeing society from free-lunch economic rent seekers, freeing up the resources so they could be devoted as completely as possible to the development of "the physical requisites which empower and enable human life".

What we have to do to develop those physical requisites – and increasingly the limitations imposed by the requirements of sustainability – is pretty well known. Whether a science of money can be devised to help accomplish that goal or some other mechanism for distributing the wealth made possible by advances in science and technology is required is increasingly open to question.

Take a look at Soddy's –THE THREE INGREDIENTS OF WEALTH (DISCOVERY, NATURAL ENERGY AND DILIGENCE). p. 61 The first two are firmly embedded in time and space.

skippy , June 9, 2018 at 11:21 pm

I have read Soddy, more so I have talked with PM sorts for a long time, hence I'm not ignorant of the camps views or actions during said time.

Onward

"a logical definition of wealth is absolutely needed ".

I did reference the Cambridge Controversy, are you informed WRT this aspect.

"A definition of wealth must be based upon the nature of physical or material wealth, in the sense of the physical requisites which empower and enable human life-that is, which supply human beings with the means to live, and, as an after consequence of living, to love, think and pursue goodness, beauty and truth.p. 108"

Sorry but . "consequence of living, to love, think and pursue goodness, beauty and truth" has nothing scientific about it.

I reiterate – Metaphilosophy has no scientific underpinnings and attempts to "brand" it otherwise in only to burnish its credentials without any empirical satisfaction is just rhetorical gaming.

"you can not accuse the classical economists of just dabbling in philosophy."

Hay I respect Hudson, that does not mean I worship him, hes been invaluable to the discovery process, but, that does not mean everything he has to say is the word of dawg, nor would I surrender my cognitive processes just because someone uses the term classical.

If I have to go that space I would favor say Veblen or Lars P. Syll where if your to own a thing one must accept the responsibility from a social aspect and not one of atomistic individualism.

But hay I regress . because I'm still waiting for someone to show me a few decades of a labour market in "action".

skippy , June 9, 2018 at 11:22 pm

BTW it would be incumbent of you to redress my concerns above without forging a new path which excludes them.

steven , June 10, 2018 at 1:40 am
"BTW it would be incumbent of you to redress my concerns above without forging a new path which excludes them." – Sorry if I did that. It was not my intent. Wikipedia is my only exposure to the Cambridge Controversy . As I understand it, science is supposed to be all about observing the real world and then drawing conclusions from those observations. It looks to me like the participants in the debate were looking at their models and maybe the logic they used to construct them, not the world they were supposed to be modeling.
"Most of the debate is mathematical, while some major elements can be explained as part of the aggregation problem. The critique of neoclassical capital theory might be summed up as saying that the theory suffers from the fallacy of composition;"
This kind of cant is a far cry from something like:

"Though it was not understood a century ago, and though as yet the applications of the knowledge to the economics of life are not generally realised, life in its physical aspect is fundamentally a struggle for energy , in which discovery after discovery brings life into new relations with the original source. Evolutionary development has been parasitic, higher and higher organisms arising and obtaining the requisite supplies of energy by feeding upon the lower. But with man and the development of conscious reason, that process as regards energy is being reversed. "

(emphasis added)

Sister Gloria , June 9, 2018 at 8:46 am

Sorry, but where does Positive Money , in any of the publications and articles, propose any limitations on 'credit' ?
I never saw that.
Or AMI or any of these public money types for that matter?
Thank you.

Paul L. , June 9, 2018 at 9:45 am

You are completely correct, they don't. This is all made up propaganda against the democratization of the money supply. What PM proposes is sound credit creation.

skippy , June 9, 2018 at 8:23 pm

PM wants to establish a non democratic administration of government issuance and then allow a return to the free banking period of the 1800s. All based on notions of EMH and QTM contra to all the historical data from that period. So on one had PM wants to lay claim to scientific methodology WRT money yet still cling to scientifically refuted EMH.

As far as I can discern PM proponents advance the belief that this would compel banks to become investment entities for "productive" activities. Don't know how that would work out considering how corporatism views society.

Sound of the Suburbs , June 9, 2018 at 4:13 pm

MMT has looked at publicly created money.

The positive money people have come at it from the other angle. People like Richard Werner have been studying the problems with privately created money since the Japanese economy blew up in the 1980s .

https://www.youtube.com/watch?v=EC0G7pY4wRE&t=3s

They have seen all the problems with privately created money and the positive money people were very pleased when the BoE confirmed their beliefs in 2014.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

The positive money people have come to the wrong conclusion through not understanding publicly created money.

The MMT people can learn a lot about the problems of privately created money from the positive money people.

The two camps should merge to get the big picture.

I started looking into all the problems of privately created money after 2008 and was a latecomer to MMT.

The two merge nicely when you think about it and realise the why the positive money people came to the conclusion they did. They just didn't understand the way publicly created money works now.

djrichard , June 9, 2018 at 4:19 pm

In the case of Japan, unless I'm misunderstanding things there, presumably they've embraced MMT out the wazoo, in that they're willing to leverage federal gov debt out the wazoo. And yet I think the consensus still seems to be that their economy is still zombified (still not really recovered from the debt overhang from their go go years). In which case, why is that?

Has Japan been hamstringing their use of MMT, so it's less effective than it could be? Do they need to up the ante, employ MMT-on-steroids to overcome the trap that they're in, say like the US needed WWII to get out of its trap?

Withstanding MMT-on-steroids, should it be QE-on-steroids instead that get the animal spirits rekindled? I don't have a strong sense of whether the US central bank has done more in that department compared to the central bank of Japan. Or if indeed, the US central bank has been more successful on that front. It's clear that animal spirits are certainly rekindled in the US – the usual playahs are back at it. Though whether that's unzombified our economy, I'm not so sure – I don't think it has.

If these hurdles are so difficult, seems to me we should have a monetary system that doesn't result in a zombified economy to begin with, per the comment I was making further above.

Synoia , June 9, 2018 at 10:41 pm

And yet I think the consensus still seems to be that their economy is still zombified (still not really recovered from the debt overhang from their go go years). In which case, why is that?

Debt Peonage. For it to work there has to be a debt jubilee (a forgiveness of peoples debt).

Older & Wiser , June 9, 2018 at 8:21 pm

China´s Battle for Money

" It seems there are greater similarities between China and the US than may be visible at first glance. China builds real estate for a shrinking population, invests for an over-indebted client (the US, which even insists on a drastic reduction of the bilateral trade deficit) and finances all this with money it does not have ."

https://mises.org/wire/china-trouble

skippy , June 9, 2018 at 9:39 pm

I know the answer to this dilemma – Praxeology – !!!!!

skippy , June 9, 2018 at 8:29 pm

MMT has always stated to whom the debt is owed is the crux of the matter and in what form denoted.

I have trouble understanding the dramas with bank issued credit when squared with say equities, why all the focus on one and not to be inclusive of a wide assortment of other mediums of exchange and how they are created and why.

skippy , June 9, 2018 at 9:27 pm

Sorry comment was directed at djrichard above.

So tell me why J – bonds are called the death trade e.g. shorters nightmare – albeit they will tell you their shorts are being thwarted by ev'bal forces.

The Rev Kev , June 9, 2018 at 10:26 pm

Couldn't resist this. That title has me intrigued so, with apologies to Winston Churchill-

" What (neoliberals have) called the Battle of (Credit) is over the Battle of (Money) is about to begin. Upon this battle depends the survival of (world) civilisation. Upon it depends our own (western) life, and the long continuity of our institutions and our (civilization). The whole fury and might of the enemy must very soon be turned on us. (Neoliberals) knows that (they) will have to break us in this (idea) or lose the war. If we can stand up to (them), all (the world) may be freed and the life of the world may move forward into broad, sunlit uplands.
But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new dark age made more sinister, and perhaps more protracted, by the lights of perverted science. Let us therefore brace ourselves to our duties, and so bear ourselves, that if the (United Nations) and its (Countries) last for a thousand years, men will still say, "This was their finest hour." "

skippy , June 9, 2018 at 10:50 pm

https://www.nakedcapitalism.com/2011/11/mark-ames-libertarian-liars-top-reagan-adviser-cato-institute-chairman-william-niskanen-%E2%80%9Cdeficits-don%E2%80%99t-matter%E2%80%9D.html

Yet then some say AET and Neoclassical economics just needs to implement PM and all will be well.

I've yet to see any PM advocate or proponent criticize an executive or corporatism, only banksters and some politicians. On the other hand I've seen many PM sorts back crypto based on the argument of decentralization. So which is it, counterfeiting of national money with a side of corruption or a case of counterfeiting ex nihilo via some arbitrary computational source with a predominate side of corruption.

I am completely at a loss to understand how the debate about money proceeds things like Marginalism, supply and demand as a monolith, rational agent models, theoclassical opinions elevated to truisms [economic laws] and a reduction of human experience as a binary condition set in stone.

I also have issues with PM advocates and their UBI agenda, due to its original proponents views on the need to water down democracy more to keep the unwashed from just voting themselves more money. It is in my opinion logically incoherent, that is just what has occurred during the neoliberal period and corporatists via the democracy of money through lobbyists – every dollar is a vote – et al.

In light of that I can only surmise that PM is actually pro elitist, not that I have issues with some being elite, that is another story altogether, but money itself is not the bar.

[Jun 10, 2018] Hiding the Real Number of Unemployed by Pete Dolack

Notable quotes:
"... The Globe and Mail ..."
"... The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China ..."
Jun 08, 2018 | www.counterpunch.org

... ... ...

Nonetheless, you might have noticed that happy days aren't exactly here again. The real U.S. unemployment figure -- all who are counted as unemployed in the "official" rate, plus discouraged workers, the total of those employed part-time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up) -- is 7.6 percent . (This is the "U-6" rate.) That total, too, is less than half of its 2010 peak and is the lowest in several years. But this still doesn't mean the number of people actually working is increasing.

Fewer people at work and they are making less

A better indication of how many people have found work is the "civilian labor force participation rate." By this measure, which includes all people age 16 or older who are not in prison or a mental institution, only 62.7 percent of the potential U.S. workforce was actually in the workforce in May, and that was slightly lower than the previous month. This is just about equal to the lowest this statistic has been since the breakdown of Keynesianism in the 1970s, and down significantly from the peak of 67.3 percent in May 2000. You have to go back to the mid-1970s to find a time when U.S. labor participation was lower. This number was consistently lower in the 1950s and 1960s, but in those days one income was sufficient to support a family. Now everybody works and still can't make ends meet.

And that brings us to the topic of wages. After reaching a peak of 52 percent in 1969, the percentage of the U.S. gross domestic product going to wages has fallen to 43 percent , according to research by the St. Louis branch of the Federal Reserve. The amount of GDP going to wages during the past five years has been the lowest it has been since 1929 , according to a New York Times report. And within the inequality of wages that don't keep up with inflation or productivity gains, the worse-off are doing worse.

The Economic Policy Institute noted , "From 2000 to 2017, wage growth was strongest for the highest-wage workers, continuing the trend in rising wage inequality over the last four decades." The strongest wage growth was for those in the top 10 percent of earnings, which skewed the results sufficiently that the median wage increase for 2017 was a paltry 0.2 percent, the EPI reports. Inflation may have been low, but it wasn't as low as that -- the typical U.S. worker thus suffered a de facto wage decrease last year.

What this sobering news tells us is that good-paying jobs are hard to come by. An EPI researcher, Elise Gould, wrote :

"Slow wage growth tells us that employers continue to hold the cards, and don't have to offer higher wages to attract workers. In other words, workers have very little leverage to bid up their wages. Slow wage growth is evidence that employers and workers both know there are still workers waiting in the wings ready to take a job, even if they aren't actively looking for one."

The true unemployment rates in Canada and Europe

We find similar patterns elsewhere. In Canada, the official unemployment rate held at 5.8 percent in April , the lowest it has been since 1976, although there was a slight decrease in the number of people working in March, mainly due to job losses in wholesale and retail trade and construction. What is the actual unemployment rate? According to Statistics Canada's R8 figure , it is 8.6 percent. The R8 counts count people in part-time work, including those wanting full-time work, as "full-time equivalents," thus underestimating the number of under-employed.

At the end of 2012, the R8 figure was 9.4 percent , but an analysis published by The Globe and Mail analyzing unemployment estimated the true unemployment rate for that year to be 14.2 percent. If the current statistical miscalculation is proportionate, then the true Canadian unemployment rate currently must be north of 13 percent. "[T]he narrow scope of the Canadian measure significantly understates labour underutilization," the Globe and Mail analysis conclude.

Similar to its southern neighbor, Canada's labor force participation rate has steadily declined, falling to 65.4 percent in April 2018 from a high of 67.7 percent in 2003.

The most recent official unemployment figure in Britain 4.2 percent. The true figure is rather higher. How much higher is difficult to determine, but a September 2012 report by Sheffield Hallam University found that the total number of unemployed in Britain was more than 3.4 million in April of that year although the Labour Force Survey, from which official unemployment statistics are derived, reported only 2.5 million. So if we assume a similar ratio, then the true rate of unemployment across the United Kingdom is about 5.7 percent.

The European Union reported an official unemployment rate of 7.1 percent (with Greece having the highest total at 20.8 percent). The EU's Eurostat service doesn't provide an equivalent of a U.S. U-6 or a Canadian R8, but does separately provide totals for under-employed part-time workers and "potential additional labour force"; adding these two would effectively double the true EU rate of unemployed and so the actual figure must be about 14 percent.

Australia's official seasonally adjusted unemployment rate is 5.6 percent , according to the country's Bureau of Statistics. The statistic that would provide a more realistic measure, the "extended labour force under-utilisation" figure, seems to be well hidden. The most recent figure that could be found was for February 2017, when the rate was given as 15.4 percent. As the "official" unemployment rate at the time was 5.8 percent, it is reasonable to conclude that the real Australian unemployment rate is currently above 15 percent.

Mirroring the pattern in North America, global employment is on the decline. The International Labour Organization estimated the world labor force participation rate as 61.9 percent for 2017, a steady decline from the 65.7 percent estimated for 1990.

Stagnant wages despite productivity growth around the world

Concomitant with the high numbers of people worldwide who don't have proper employment is the stagnation of wages. Across North America and Europe, productivity is rising much faster than wages. A 2017 study found that across those regions median real wage growth since the mid-1980s has not kept pace with labor productivity growth.

Not surprisingly, the United States had the largest gap between wages and productivity. Germany was second in this category, perhaps not surprising, either, because German workers have suffered a long period of wage cuts (adjusted for inflation) since the Social Democratic Party codified austerity by instituting Gerhard Schröder's "Agenda 2010" legislation. Despite this disparity, the U.S. Federal Reserve issued a report in 2015 declaring the problem of economic weakness is due to wages not falling enough . Yes, the Fed believes your wages are too high.

The lag of wages as compared to rising productivity is an ongoing global phenomenon. A separate statistical analysis from earlier this decade also demonstrated this pattern for working people in Canada, the United States, Britain, France, Germany, Italy and Japan. Workers in both Canada and the United States take home hundreds of dollars less per week than they would if wages had kept up with productivity gains.

In an era of runaway corporate globalization, there is ever more precarity. On a global scale, having regular employment is actually unusual. Using International Labour Organization figures as a starting point, John Bellamy Foster and Robert McChesney calculate that the "global reserve army of labor" -- workers who are underemployed, unemployed or "vulnerably employed" (including informal workers) -- totals 2.4 billion. In contrast, the world's wage workers total 1.4 billion. Writing in their book The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China , they write:

"It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well." [page 145]

Having conquered virtually every corner of the globe and with nowhere left to expand into nor new markets to take, capitalists will continue to cut costs -- in the first place, wages and benefits -- in their ceaseless scrambles to sustain their accustomed profits. There is no reform that can permanently alter this relentless internal logic of capitalism. Although she was premature, Rosa Luxemburg's forecast of socialism or barbarism draws nearer.

Pete Dolack writes the Systemic Disorder blog and has been an activist with several groups. His book, It's Not Over: Learning From the Socialist Experiment , is available from Zero Books.

[Jun 10, 2018] Trump At G-7 Closing Remarks We're The Piggy Bank That Everybody's Robbing

Looks like Trump adopted Victoria Nuland "Fuck the EU" attitude ;-). There might be nasty surprises down the road as this is uncharted territory: destruction of neoliberal globalization.
Trump proved to be a really bad negotiator. he reduced the USA to a schoolyard bully who beats up his gang members because their former victims have grown too big.
As the owner of world reserve currency the USA is able to tax US denominated transactions both via conversion fees and inflation. As long as the USA has dollar as a reserve currency the USA has so called "exorbitant priviledge" : "In the Bretton Woods system put in place in 1944, US dollars were convertible to gold. In France, it was called "America's exorbitant privilege"[219] as it resulted in an "asymmetric financial system" where foreigners "see themselves supporting American living standards and subsidizing American multinationals"."... "De Gaulle openly criticised the United States intervention in Vietnam and the "exorbitant privilege" of the United States dollar. In his later years, his support for the slogan "Vive le Québec libre" and his two vetoes of Britain's entry into the European Economic Community generated considerable controversy." Charles de Gaulle - Wikipedia
Notable quotes:
"... Errrr, that so-called "piggy bank' just happens to; ..."
"... have the world's reserve currency ..."
"... dominates the entire planet militarily since the end of the Cold War ..."
"... dictates "regime change" around the world ..."
"... manipulates and controls the world's entire financial system, from the price of a barrel to every financial transaction in the SWIFT system. ..."
"... And Trump has the ignorance, the arrogance and the audacity to be pleading 'poverty?' ..."
Jun 10, 2018 | www.zerohedge.com

On trade:

"We had productive discussion on having fair and reciprocal" trade and market access.

"We're linked in the great effort to create a more just and prosperous world. And from the standpoint of trade and creating more prosperous countries, I think they are starting to be committed to more fair trade. We as a nation lost $870 billion on trade...I blame our leaders and I congratulate leaders of other countries for taking advantage of our leaders."

"If they retaliate they're making a tremendous mistake because you see we have a tremendous trade imbalance...the numbers are so much against them, we win that war 1000 times out of a 1000."

"We're negotiating very hard, tariffs and barriers...the European Union is brutal to the United States....the gig is up...there's nothing they can say."

"We're like the piggy bank that everybody's robbing."

"I would say the level of relationship is a ten - Angela, Emmanuel and Justin - we have a very good relationship. I won't blame these people, unless they don't smarten up and make the trades fair."

Trump is now making the 20-hour flight to Singapore, where he will attend a historic summit with North Korea leader Kim Jong Un. We'll now keep our eye out for the finalized communique from the group. The US is typically a leader in the crafting of the statement. But this time, it's unclear if the US had any input at all into the statement, as only the leaders from Britain, Canada, France, Germany, Italy and Japan as well as the presidents of the European Commission and European Council remain at the meeting. But regardless of who writes it, the statement will probably be of little consequence, as UBS points out:

Several heads of state will be heading off on a taxpayer-financed "mini-break" in Canada today. In all of its incarnations (over the past four years, we've gone from G-8 to G-6+1) the group hasn't really accomplished much since an initial burst of enthusiasm with the Plaza Accords and Louvre Accords in the 1980s.

And this meeting likely won't be any different.


Simplifiedfrisbee -> ravolla Sat, 06/09/2018 - 11:31 Permalink

Unprepared son of a bitch.

Sack of filth.

Klassenfeind -> Dickweed Wang Sat, 06/09/2018 - 11:43 Permalink

"We're the piggy bank that everybody is robbing." Excuse me?!

Errrr, that so-called "piggy bank' just happens to;

  1. have the world's reserve currency
  2. dominates the entire planet militarily since the end of the Cold War
  3. dictates "regime change" around the world
  4. manipulates and controls the world's entire financial system, from the price of a barrel to every financial transaction in the SWIFT system.

And Trump has the ignorance, the arrogance and the audacity to be pleading 'poverty?'

Who THE FUCK is robbing who here?!?

Escrava Isaura -> helltothenah Sat, 06/09/2018 - 14:51 Permalink

By the way, Trump is right on the tariffs in my view, Europeans should lower their tariffs and not having the US raising it.

Trump: "We're The Piggy Bank That Everybody's Robbing"

Isn't Trump great in catch phrases? Trump's base will now regurgitate it to death.

Now reconcile Trump's remarks with reality:

Professor Werner: Germany is for instance not even allowed to receive delivery of US Treasuries that it may have purchased as a result of the dollars earned through its current account surplus: these Treasuries have to be held in custody by the Federal Reserve Bank of New York, a privately owned bank: A promise on a promise. At the same time, German influence over the pyramid structure of such promises has been declining rapidly since the abolition of the German currency and introduction of the euro, controlled by an unaccountable supranational international agency that cannot be influenced by any democratic assembly in the eurozone. As a result, this structure of one-sided outflows of real goods and services from Germany is likely to persist in the short and medium-term.

To add insult to injury:

Euro-federalists financed by US spy chiefs

The documents show that ACUE financed the European Movement, the most important federalist organisation in the post-war years. In 1958, for example, it provided 53.5 per cent of the movement's funds.

https://www.telegraph.co.uk/news/worldnews/europe/1356047/Euro-federalists-financed-by-US-spy-chiefs.html

bshirley1968 -> Escrava Isaura Sat, 06/09/2018 - 15:00 Permalink

Okay, everyone set your "team" aside for a few minutes and let's look at the facts and reality.

Do you really believe the rest of the world has trade advantages over the US? Well, let's consider major industries.

Agriculture.....maybe, but only sightly. Our farmers are the richest in the workd....by far.

Manufacturers.....probably so....because we gave it away to countries with slave labor. Manufacturers jobs were jobs where people could earn a decent living...and that had to go..can't be cutting into corporate profits with all that high cost labor.

Defense.....need I go here? We spend more than the next 11 countries combined! We sell more as well.

Energy.....we rule thus space because we buy it with worthless printed fiat debt...whenever we want to....and nd if you deny us, we will bomb the hell out of you and take it.

Technology. ....Apple, Microsoft, Intel, Google, Amazon, Oracle, Dell, Cisco.....who can touch that line up....not to mention all the on-line outfits like Facebook and Twitter.

Finance.....the best for last. We control the printing press that prints the dollar the rest of the world needs. We control energy and foreign policy. Don't do what we like and we will cut you off from SWIFT and devalue the hell out of your currency...and then move in for the "regime" change to some one who plays ball the way we like it. 85% of all international trade takes place in dollars everyday. We have the biggest banks, Wall Street, and infest the world with our virus called the dollar so that we can Jeri their chain at will.

Now I ask you....just where the hell is the "trade imbalances"? Sure there are some companies or job sectors that get a raw deal because our politicians give some foreigners unfair trade advantages here and there, but as a whole, we dominate trade by far. The poor in our country lives like kings compared to 5.5 billion of the world's population. Trump knows this.....or he is stupid. He is pandering to his sheeple voting base that are easily duped into believing someone is getting what is their's.

Hey, I am thankful to be an American and enjoy the advantages we have. But I am not going to stick my head up Trump's ass and agree with this bullshit. It is misdirection (corporate America and politicians are the problem here, not foreign countries) and a major distraction. Because all the trade in the world isn't going to pull us out of this debt catastrophe that's coming.

waspwench -> bshirley1968 Sat, 06/09/2018 - 16:47 Permalink

But, if we cut through all the verbiage, we will arrive at the elephant in the room.

American manufacturing jobs have been off-shored to low wage countries and the jobs which have replaced them are, for the most part, minium wage service jobs. A man cannot buy a house, marry and raise a family on a humburger-flippers wage. Even those minimum wage jobs are often unavailable to Americans because millions of illegal aliens have been allowed into the country and they are undercutting wages in the service sector. At the same time, the better paid positions are being given to H-1B visa holders who undercut the American worker (who is not infrequently forced to train his own replacement in order to access his unemployment benefits.)

As the above paragraph demonstrates the oligarchs are being permitted to force down American wages and the fact that we no longer make, but instead import, the things we need, thus exporting our wealth and damaging our own workers is all the same to them. They grow richer and they do not care about our country or our people. If they can make us all into slaves it will suit them perfectly.

We need tariffs to enable our workers to compete against third world wages in countries where the cost-of-living is less. (American wages may be stagnating or declining but our cost-of-living is not declining.) We need to deport illegal aliens and to stop the flow of them over our borders. (Build the wall.) We need to severely limit the H-1B visa programme which is putting qualified Americans out of work. (When I came to the US in 1967 I was permitted entry on the basis that I was coming to do a job for which there were not enough American workers available. Why was that rule ever changed?)

bshirley1968 -> waspwench Sat, 06/09/2018 - 18:45 Permalink

You are making my point. China didn't "off shore" our jobs....our politicians and corporations did. You can't fix that by going after other countries. You fix that by penalizing companies for using slave labor workers from other countries. Tariffs are not going to fix this. They will just raise prices on everyone.

I can't believe you Trumptards can't see this! Once again we will focus on a symptom and ignore the real problem. Boy, Trump and his buddies from NYC and DC have really suffered because of unfair trade practices, right? Why can't you people see that "government is the problem" and misdirection your attention to China, Canada, Germany, Mexico, or whomever is just that....misdirection.

I would tax the shit out of companies like Apple that make everything overseas with slave labor and then ship it in here to sell to Americans at ridiculous prices.

Plenty of down votes but no one has proven that I am wrong on one point.

mkkby -> helltothenah Sat, 06/09/2018 - 17:52 Permalink

The EU countries have free college, health care, day care and just about everything else. All paid for because they have no military spending.

It's all on the backs of the US tax payer. Or the fed, if you prefer.

Trump is working both angles. Forcing them to pay for their own defense. Forcing them to allow US products with no trade disadvantages. Go MAGA and fuck the EU.

[Jun 10, 2018] Trump and National Neoliberalism, Revisited by Sasha Breger Bush

Highly recommended!
Notable quotes:
"... But if we take seriously the idea that Trump is a consequence of the disintegration of American democracy rather than the cause of it, this "blame game" becomes especially problematic. Partisan bickering, with one party constantly pointing to the other as responsible for the country's ills, covers up the fact that Democrats and Republicans alike have presided over the consolidation of corporate power in the United States. To paraphrase Ralph Nader, the U.S. corporate state is a two-headed beast. Sure, President Trump and the Republican Party are currently handing over public lands to oil and gas companies, eliminating net neutrality, introducing pro-corporate tax legislation, kowtowing to the military industrial complex, defunding the welfare state, and attempting to privatize education and deregulate finance. But let's not forget our recent Democratic presidents, for example, who are also guilty of empowering and enriching big business and disempowering and impoverishing ordinary Americans. ..."
"... All of this is to say that I'm considerably less excited about 2018 and 2020 than many others -- on what counts as the U.S. left -- appear to be. Democratic Party victories at the ballot box would certainly reduce some of the pressures on a variety of marginalized groups who are suffering mightily under President Trump. This is, of course, a good thing. But, Democratic victories will not "fix" the structural problems that underpin our current political crisis nor will they ensure a freer and more just future. ..."
Jun 10, 2018 | www.dollarsandsense.org

This article is from Dollars & Sense : Real World Economics, available at http://www.dollarsandsense.org

Last winter, in the wake of the 2016 Presidential election, I wrote an article for Dollars & Sense in which I argued that Trump's election represented a transition toward "national neoliberalism" in the United States ("Trump and National Neoliberalism: Trump's ascendance means the end of globalism -- but not of neoliberalism," January/February 2017).

I argued that this emergent state of affairs would be marked by a completion of the takeover of the U.S. government by corporate interests. I saw the election of Trump -- a top one-percenter and real estate tycoon firmly rooted in the culture and logic of big business, who has somehow convinced many Americans that he is an anti-establishment "outsider" -- as an "unmasking" of the corporate state, a revelation of the ongoing merger between state and market that has arguably been ongoing since the 1970s. In short, I envisioned a movement away from "global neoliberalism," a state of affairs characterized by the increasing preeminence of transnational corporate capital in a relatively open global political-economic system, and towards "national neoliberalism," a state of affairs in which transnational corporate dominance is cemented in the context of an ever more fragmented and dangerous global system.

About ten years ago, political theorist Sheldon Wolin published Democracy Incorporated , diagnosing American democracy with a potentially fatal corporate disease. Referring to the specter of "inverted totalitarianism," Wolin writes in his preface:

Primarily it represents the political coming of age of corporate power and the political demobilization of the citizenry. Unlike the classic forms of totalitarianism [e.g. Germany, Italy], which openly boasted of their intentions to force their societies into preconceived totality, inverted totalitarianism is not expressly conceptualized as an ideology or objectified in public policy. Typically it is furthered by power-holders and citizens who often seem unaware of the deeper consequences of their actions or inactions. There is a certain heedlessness, an inability to take seriously the extent to which a pattern of consequences may take shape without having been preconceived. Wolin paints a picture of a gradual process of change in which many different actors, some wealthy and powerful and others not, unwittingly push the country's politics, bit by bit in piecemeal fashion, towards an undemocratic, corporate-controlled end. Many of these actors may have good intentions. Many of them may see themselves as champions of the people. Many of them may actually speak out against the very interests that they in other ways empower.

This framework for thinking about the plight of the United States, which has for me been legitimated over and over again during Trump's first year in office, conditions how I think about President Trump and the Republican Party, and how I think about our opportunities for nonviolent social transformation, freedom, and social justice. It's hard not to point to President Trump and blame him for our problems. He is a bigot who has struck out at immigrants, Muslims, Arabs, African-Americans, Mexicans, women, LGBT people, and disabled people. He lacks the basic knowledge of politics and foreign policy that are a necessary condition for competent leadership. He picked up a congratulatory call from the President of Taiwan in December 2016, disrupting relations with China, and called North Korean dictator Kim Jong Un "short" and "fat." He is a paranoid and narcissistic demagogue who has scorned and marginalized journalists, and made the terms "fake news" and "alternative facts" household words. He is a corrupt businessman who is using the levers of power that he controls to enrich Big Business, as well as his cronies, his friends, and himself. I could go on.

It's also hard not to point to Republicans in Congress. After the election, there was hope that the "never Trump" Republicans would win out and that Trump's agenda would be blocked. This has not happened. While some in Congress, like Senators McCain (R-Ariz.), Corker (R-Tenn.), Collins (R-Maine), Flake (R-Ariz.) and Murkowski (R-Alaska) have defied Trump in certain contexts (e.g. on foreign policy), on many issues congressional Republicans have simply fallen in line (e.g. with tax reform). Today, the Republican Party is often discussed by liberals in the same breath as Trump, with everyone hoping for good news in 2018 and 2020.

But if we take seriously the idea that Trump is a consequence of the disintegration of American democracy rather than the cause of it, this "blame game" becomes especially problematic. Partisan bickering, with one party constantly pointing to the other as responsible for the country's ills, covers up the fact that Democrats and Republicans alike have presided over the consolidation of corporate power in the United States. To paraphrase Ralph Nader, the U.S. corporate state is a two-headed beast. Sure, President Trump and the Republican Party are currently handing over public lands to oil and gas companies, eliminating net neutrality, introducing pro-corporate tax legislation, kowtowing to the military industrial complex, defunding the welfare state, and attempting to privatize education and deregulate finance. But let's not forget our recent Democratic presidents, for example, who are also guilty of empowering and enriching big business and disempowering and impoverishing ordinary Americans.

President Obama presided over the modernization of the U.S. nuclear arsenal, a process that President Trump is continuing. As William Hartung recently reported in Mother Jones , "There is, in fact, a dirty little secret behind the massive U.S. arsenal: It has more to do with the power and profits of weapons makers than it does with any imaginable strategic considerations." President Obama also helped corporations get richer and more powerful in other ways. He negotiated the Trans-Pacific Partnership, a multilateral trade deal that, if Trump had not withdrawn us, would have expanded U.S. corporate access to overseas markets and given multinational corporates new policy leverage over governments (via investor-state dispute settlement mechanisms). (See Robin Brand, "Remembering the 'Tokyo No'," Dollars & Sense , January/February 2015.) In 2012, as he was running for his second term, Obama proposed a reduction in the corporate tax rate to 28%, not much different from the bill just passed by Congress. He also lobbied Congress for the $700 billion Wall Street bailouts after the Great Recession, continuing on the policy path set by his Republican predecessor, President Bush. (Obama received huge campaign contributions from finance, insurance, and real estate.) In terms of income inequality, CNBC had to reluctantly conclude that the gap widened under Obama, in spite of all his powerful rhetoric about equity and equality.

President Clinton negotiated and signed NAFTA into law, a trade agreement that created hardship for millions of American manufacturing workers and farmers, and generated large profits for multinational industrial and agricultural corporations. Clinton also pushed for welfare reform, signing into law a "workfare" system that required recipients to meet strict job and employment related conditions. Millions of people became ineligible for payments under the new system, and poverty increased especially among households in which members were long-term unemployed. Clinton's 1997 tax proposal advocated cutting estate taxes and capital gains taxes, and did not favor lower-income Americans. The Center on Budget and Policy Priorities noted, "Analyses by the Treasury Department indicate that when fully in effect, the Clinton plan would give the 20 percent of Americans with the highest incomes about the same amount in tax cuts as the bottom 60 percent combined. This is an unusual characteristic for a tax plan proposed by a Democratic President."

All of this is to say that I'm considerably less excited about 2018 and 2020 than many others -- on what counts as the U.S. left -- appear to be. Democratic Party victories at the ballot box would certainly reduce some of the pressures on a variety of marginalized groups who are suffering mightily under President Trump. This is, of course, a good thing. But, Democratic victories will not "fix" the structural problems that underpin our current political crisis nor will they ensure a freer and more just future.

I plan to support third-party candidates at the ballot box in coming years, in the hopes of contributing to the creation of a new kind of political infrastructure that can help us to unmake the corporate state.

SASHA BREGER-BUSH is an assistant professor of political science at the University of Colorado–Denver.

[Jun 06, 2018] Despite the fact that Trump folded, for the foreseeable future the Neocons will continue to focus their energy on trying to impeach Trump by the Saker

This article on almost a year old but thinks are developing as predicted. Which increases its value.
"... Since when did Trump become an expert on political science and world history anyway? Who does he think he is lecturing? Yet another US middle school classroom?! Does he not realize that a good number of the countries represented at the UN consider themselves Socialist?! Furthermore, while I don't necessarily disagree with the notion that Socialist and Communist ideas have often been a disaster in the 20th century, Socialism in the 21st century is an entirely different beast and the jury is still very much out on this issue, especially when considering the social, political, economic, ecological, psychological and even spiritual disaster Capitalism is now proving to be for much of the planet. Being the President of a country as dysfunctional as the US, Trump would be well-advised to tone down his arrogant pontifications about Socialism and maybe even open a book and read about it. ..."
"... My guess is that all they want is to send a clear messages to the Comprador elites running most countries that this is the "official ideology of the AngloZionist Empire" and if they want to remain in power they better toe the line even if nobody takes this stuff seriously. Yup, back to a 1980s Soviet kind of attitude towards propaganda: nobody cares what everybody else really thinks as long as everybody continues to pretend to believe the official propaganda. ..."
"... Ever since the Neocons overthrew Trump and made him what is colloquially referred to as their "bitch" the US foreign policy has come to a virtual standstill. ..."
"... Because, and make no mistake here, if the US cannot get anything constructive done any more, they retain a huge capability to disrupt, subvert, create chaos and the like. ..."
"... However, the US themselves are now the prime victim of a decapitated Presidency and a vindictive and generally out of control Neocon effort to prevent true American patriots to "get their country back" (as they say) and finally overthrow the regime in Washington DC. ..."
Notable quotes:
"... Since when did Trump become an expert on political science and world history anyway? Who does he think he is lecturing? Yet another US middle school classroom?! Does he not realize that a good number of the countries represented at the UN consider themselves Socialist?! Furthermore, while I don't necessarily disagree with the notion that Socialist and Communist ideas have often been a disaster in the 20th century, Socialism in the 21st century is an entirely different beast and the jury is still very much out on this issue, especially when considering the social, political, economic, ecological, psychological and even spiritual disaster Capitalism is now proving to be for much of the planet. Being the President of a country as dysfunctional as the US, Trump would be well-advised to tone down his arrogant pontifications about Socialism and maybe even open a book and read about it. ..."
"... we all know who Trump's puppet-masters are nowadays so we know what to expect ..."
"... Trump is now clearly fully endorsing that fairytale that "The West" (in which Trump now hilariously includes Poland!) has defeated Hitler and saved the world. The truth is that the Nazis were defeated by the Soviets and that all the efforts of the Poles, French, Brits and even Americans were but a minor (20% max) sideshow to the "real event" (Those who still might believe in this nonsense can simply read this ). Yet again, that the Americans would feel the need to appropriate for themselves somebody else's victory is, yet again, a clear sign of weakness. Do they expect the rest of the planet to buy into this nonsense? Probably not. ..."
"... My guess is that all they want is to send a clear messages to the Comprador elites running most countries that this is the "official ideology of the AngloZionist Empire" and if they want to remain in power they better toe the line even if nobody takes this stuff seriously. Yup, back to a 1980s Soviet kind of attitude towards propaganda: nobody cares what everybody else really thinks as long as everybody continues to pretend to believe the official propaganda. ..."
"... Ever since the Neocons overthrew Trump and made him what is colloquially referred to as their "bitch" the US foreign policy has come to a virtual standstill. ..."
"... Because, and make no mistake here, if the US cannot get anything constructive done any more, they retain a huge capability to disrupt, subvert, create chaos and the like. ..."
"... However, the US themselves are now the prime victim of a decapitated Presidency and a vindictive and generally out of control Neocon effort to prevent true American patriots to "get their country back" (as they say) and finally overthrow the regime in Washington DC. ..."
"... It appears that for the foreseeable future Trump will continue to focus his energy on beating Obama for the status of "worst President in US history" while the Neocons will continue to focus their energy on trying to impeach Trump ..."
"... I still maintain that the worst President in history (excluding possibly Woodrow Wilson) was Bill Clinton (strongly influenced, no doubt, by Hillary.) Sure, the 90′s were a great time in America, but Clinton's evil actions (signing NAFTA, the Crime Bill, ignoring Bin Laden, and repealing Glass-Steagall to name just a few) had not yet come to fruition. ..."
"... Consider that the scene he bought into is the product of 70 years of constant propaganda aimed at the American psyche and how successful that has been. ..."
"... Hillary would not have done anything different than Trump. Trump is a dumb shit sycophant of the Deep State just like Hillary. ..."
"... "Step by step the US is getting closer to a civil war" That pretty much says it all. All it will take is for US troops to get an unexpected butt kicking somewhere, sometime. ..."
Sep 20, 2017 | www.unz.com

Late this morning, outraged emails started pouring in. My correspondents reported "getting sick" and having their "heart ache". The cause of all that? They had just watched Trump's speech at the UN...

You can read the full (rush, not official) text here or watch the video here . Most of it is so vapid that I won't even bother posting the full thing. But there are a few interesting moments including those:

"We will be spending almost $700 billion on our military and defense. Our military will soon be the strongest it has ever been"

This short sentence contains the key to unlock the reason behind the fact that while the US military is extremely good at killing people in large numbers, it is also extremely bad at winning wars. Like most Americans, Trump is under the illusion that spending a lot of money "buys" you a better military. This is completely false, of course. If spending money was the key to a competent military force, the US armed forces would have already conquered the entire planet many times over. In reality, they have not won anything meaningful since the war in the Pacific.

...then he suddenly decided to share this outright bizarre insight of his:

The problem in Venezuela is not that socialism has been poorly implemented, but that socialism has been faithfully implemented. From the Soviet Union to Cuba to Venezuela, wherever true socialism or communism has been adopted, it has delivered anguish and devastation and failure.

Since when did Trump become an expert on political science and world history anyway? Who does he think he is lecturing? Yet another US middle school classroom?! Does he not realize that a good number of the countries represented at the UN consider themselves Socialist?! Furthermore, while I don't necessarily disagree with the notion that Socialist and Communist ideas have often been a disaster in the 20th century, Socialism in the 21st century is an entirely different beast and the jury is still very much out on this issue, especially when considering the social, political, economic, ecological, psychological and even spiritual disaster Capitalism is now proving to be for much of the planet. Being the President of a country as dysfunctional as the US, Trump would be well-advised to tone down his arrogant pontifications about Socialism and maybe even open a book and read about it.

I won't even bother discussing the comprehensively counter-factual nonsense Trump has spewed about Iran and Hezbollah, we all know who Trump's puppet-masters are nowadays so we know what to expect . Instead, I will conclude with this pearl from The Donald:

In remembering the great victory that led to this body's founding, we must never forget that those heroes who fought against evil, also fought for the nations that they love. Patriotism led the Poles to die to save Poland, the French to fight for a free France, and the Brits to stand strong for Britain.

Echoing the nonsense he spoke while in Poland, Trump is now clearly fully endorsing that fairytale that "The West" (in which Trump now hilariously includes Poland!) has defeated Hitler and saved the world. The truth is that the Nazis were defeated by the Soviets and that all the efforts of the Poles, French, Brits and even Americans were but a minor (20% max) sideshow to the "real event" (Those who still might believe in this nonsense can simply read this ). Yet again, that the Americans would feel the need to appropriate for themselves somebody else's victory is, yet again, a clear sign of weakness. Do they expect the rest of the planet to buy into this nonsense? Probably not.

My guess is that all they want is to send a clear messages to the Comprador elites running most countries that this is the "official ideology of the AngloZionist Empire" and if they want to remain in power they better toe the line even if nobody takes this stuff seriously. Yup, back to a 1980s Soviet kind of attitude towards propaganda: nobody cares what everybody else really thinks as long as everybody continues to pretend to believe the official propaganda.

[Sidebar: When my wife and I watched this pathetic speech we starting laughing about the fact that Trump was so obscenely bad that we (almost) begin to miss Obama. This is a standing joke in our family because when Obama came to power we (almost) began to miss Dubya. The reason why this is a joke is that when Dubya came to power we decided that there is no way anybody could possibly be worse than him. Oh boy where we wrong! Right now I am still not at the point were I would be missing Obama (that is asking for a lot from me!), but I will unapologetically admit that I am missing Dubya. I do. I really do. Maybe not the people around Dubya, he is the one who truly let the Neocon "crazies in the basement" creep out and occupy the Situation Room, but at least Dubya seemed to realize how utterly incompetent he was. Furthermore, Dubya was a heck of a lot dumber than Obama (in this context being stupid is a mitigating factor) and he sure did not have the truly galactic arrogance of Trump (intelligence-wise they are probably on par)].

In conclusion, what I take away from this speech is a sense of relief for the rest of the planet and a sense of real worry for the US. Ever since the Neocons overthrew Trump and made him what is colloquially referred to as their "bitch" the US foreign policy has come to a virtual standstill. Sure, the Americans talk a lot, but at least they are doing nothing. That paralysis, which is a direct consequence of the internal infighting, is a blessing for the rest of the planet because it allows everybody else to get things done. Because, and make no mistake here, if the US cannot get anything constructive done any more, they retain a huge capability to disrupt, subvert, create chaos and the like.

But for as long as the US remains paralyzed this destructive potential remains mostly unused (and no matter how bad things look now, Hillary President would have been infinitely worse!). However, the US themselves are now the prime victim of a decapitated Presidency and a vindictive and generally out of control Neocon effort to prevent true American patriots to "get their country back" (as they say) and finally overthrow the regime in Washington DC.

Step by step the US is getting closer to a civil war and there is no hope in sight, at least for the time being. It appears that for the foreseeable future Trump will continue to focus his energy on beating Obama for the status of "worst President in US history" while the Neocons will continue to focus their energy on trying to impeach Trump , and maybe even trigger a civil war. The rest of us living here are in for some very tough times ahead. As they say in Florida when a hurricane comes barreling down on you "hunker down!".

Dan Hayes , September 19, 2017 at 11:36 pm GMT

The Saker,

Netanyahu has spoken, stating that Trump has given the boldest, most courageous UN speech that he has ever heard. Well that settles that with the prescient oracle rendering his definitive and omnipotent judgment!

FKA Max , Website September 20, 2017 at 2:02 am GMT

For What It's Worth, Trump Great On Immigration, Refugees At U.N. Today

http://www.vdare.com/posts/for-what-its-worth-trump-great-on-immigration-refugees-at-u-n-today

A lot of old friends didn't like President Trump's UN speech today because it didn't break cleanly with UniParty foreign policy! E.g. Paul Craig Roberts' comments here. But it did contain these revolutionary comments on immigration and refugee policy ! The latter especially significant because Trump has to set the quota for U.S. quota for refugees (actually expedited, subsidized, politically favored immigrants) in the next few days. Who knows what Trump will do! But Hillary would never even have said it
[...]
For the cost of resettling one refugee in the United States, we can assist more than 10 in their home region.
[...]
For decades, the United States has dealt with migration challenges here in the Western Hemisphere. We have learned that, over the long term, uncontrolled migration is deeply unfair to both the sending and the receiving countries.

For the sending countries, it reduces domestic pressure to pursue needed political and economic reform, and drains them of the human capital necessary to motivate and implement those reforms.

For the receiving countries, the substantial costs of uncontrolled migration are borne overwhelmingly by low-income citizens whose concerns are often ignored by both media and government.

peterAUS , September 20, 2017 at 2:35 am GMT

Disagree with most of the article, of course. Agree with these three:

The Americans talk a lot, but at least they are doing nothing. That paralysis, which is a direct consequence of the internal infighting .

No matter how bad things look now, Hillary President would have been infinitely worse!) ..

The rest of us living here are in for some very tough times ahead.

Fidelios Automata , September 20, 2017 at 3:13 am GMT

I still maintain that the worst President in history (excluding possibly Woodrow Wilson) was Bill Clinton (strongly influenced, no doubt, by Hillary.) Sure, the 90′s were a great time in America, but Clinton's evil actions (signing NAFTA, the Crime Bill, ignoring Bin Laden, and repealing Glass-Steagall to name just a few) had not yet come to fruition.

Robert Magill , September 20, 2017 at 3:40 am GMT

Assuming the keen political insight Trump exhibited to get himself the job he sought still exists, perhaps all this insane blather is proof it continues. Consider that the scene he bought into is the product of 70 years of constant propaganda aimed at the American psyche and how successful that has been.

Then imagine Trump feeding the ravenous American mindset for the status quo while actually working around it. Brilliant! Then again, if he truly means what he says, all is lost.

http://robertmagill.wordpress.com

Realist , September 20, 2017 at 7:47 am GMT

@peterAUS

Hillary would not have done anything different than Trump. Trump is a dumb shit sycophant of the Deep State just like Hillary.

FKA Max , Website September 20, 2017 at 10:50 am GMT

@FKA Max

The speech was reportedly written by Stephen Miller, a.k.a. Darth Vader to many in the mainstream media,
- https://www.washingtonpost.com/opinions/global-opinions/trumps-strikingly-conventional-un-speech/2017/09/19/876cb41a-9d75-11e7-9c8d-cf053ff30921_story.html?utm_term=.6df8b480a4d8

Thank you Stephen Miller! He must be reading Peter Singer:

International support for countries bearing the greatest refugee burden also makes economic sense: it costs Jordan about €3,000 ($3,350) to support one refugee for a year; in Germany, the cost is at least €12,000.
- http://www.unz.com/isteve/im-not-sure-why-but-this-headline-cracks-me-up/#comment-1746720
Another threat to the Church is the illegal immigration control movement. If this movement succeeds, and what is perceived by Latin Americans and other governments as an escape valve is shut off, these governments would logically say, "Our demographic course cannot continue." These governments would have little choice but to confront the Church and say, "If we are to survive as governments, then we must get serious about population growth control. Otherwise, we in Latin America are destined to become a sea of chaos. We, as Latin Americans, must make family planning and abortion services fully available and encourage their use." Turning off the valve to illegal immigration is therefore a serious threat to the power of the Church.
- http://www.unz.com/article/rule-or-ruin/#comment-1623864 This is Michael Anton on Trump's UN speech:

President Trump's Message: Make The United Nations Great

In fact, he's strengthened our alliances in meetings in Washington with key allies, by going to foreign capitals - the trip to France and the Bastille Day with America's oldest ally, with which the United States has in recent years had something of a rocky relationship – was strengthened enormously by that visit to Paris this year. And the president has, you know, both on a personal level and on an alliance level, really strengthened the alliance with France and with President Macron. In fact, he met with him yesterday and had a very, extremely positive and friendly meeting where they talked substantive business, but they also talked about the history of the alliance and reminisced a bit about the grandeur of that trip to Paris in July.

http://www.npr.org/2017/09/19/552025707/president-trumps-message-make-the-united-nations-great

The French president's suggestion that African women are breeding like animals and must be restrained by an enlightened elite awakens primordial terrors in the hearts of the mainstream Left and Right.
[...]
If Europeans are replaced with Africans, Western Civilization will disappear. The choices are simple: The West, yes or no? The white race, yes or no? Our rulers have exhausted all other options.

http://www.unz.com/article/trumps-warsaw-speech-and-the-real-clash-of-civilizations/#comment-1946225

Peter Singer on How Political Correctness Let African Population Growth Run Amok for a Generation

The outrage evoked by Macron's remark, however, appears to have little to do with its inaccuracy. Macron violated a taboo that has been in place since the International Conference on Population and Development, held under the auspices of the UN in Cairo in 1994. The conference adopted a Programme of Action that rejected a demographically driven approach to population policies, and instead focused on meeting the reproductive-health needs of individuals, especially women. Population targets were out; rights were in.

http://www.unz.com/isteve/peter-singer-on-how-political-correctness-let-african-population-growth-run-amok-for-a-generation/

I would like to explain what led me to conclude that Emmanuel Macron has an "Alt Right" worldview.

http://www.unz.com/article/collateral-damage/#comment-1955020

Don't lose hope
[...]
I shared this video here at the Unz Review before, but I would like to share it again, because it best encapsulates and captures what I personally associate with term "Alt Right"

http://www.unz.com/article/the-system-revealed-antifa-virginia-politicians-and-police-work-together-to-shut-down-unitetheright/#comment-1967326

French army band medleys Daft Punk following Bastille Day parade

The Scalpel , Website September 20, 2017 at 1:35 pm GMT

"Step by step the US is getting closer to a civil war" That pretty much says it all. All it will take is for US troops to get an unexpected butt kicking somewhere, sometime.

Studley , September 20, 2017 at 2:04 pm GMT

Churchill himself, one of a long list of Anglo-genocidal killers (according to The Saker's last post) admitted that, "The Red Army tore the guts out of The Wehrmacht." Is this even in dispute?

In Russian thinking therefore, with only 20% contribution by American/UK Commonwealth forces, we subtract that, and this is the diplomatic question. Why would Stalin's T34s not have rolled up to The English Channel and installed compliant Communist regimes in France/Belgium/Holland as they did in Eastern Europe?

They did the same in North Korea by installing the grandfather (Kim Il-Sung) of this young 'Rocket Man' in 1945 at the conclusion of the fighting against Japan in the far-east.

[Jun 06, 2018] And everyone knows that the "trickle down" effect does not work but don't let this truth stand in the way of the neoliberals stampeding to the trough

Yep, this is a new form of crony capitalism.
Jun 06, 2018 | discussion.theguardian.com

shirleytemple -> incompatible , 3 Jun 2018 18:03

And everyone knows that the "trickle down" effect does not work but don't let this truth stand in the way of the neoliberals stampeding to the trough.
incompatible , 3 Jun 2018 17:56
Since the 1980s, free markets have been promoted as the best way to generate wealth (which may be true) and the best way to help everyone in society since there will be more wealth to go around. That has turned out not to work so well, since the wealth doesn't "trickle down", but instead concentrates in fewer and fewer hands.
NickThiwerspoon , 3 Jun 2018 17:54
An excellent analysis. Neo-liberalism is a mechanism which transfers money from the poor to the rich. Far from "trickle down" it is in fact "siphon up".
BelindaJonas -> Colin Connelly , 3 Jun 2018 17:29
Therein lies the crux - to some folk (most, I would hesitate) money is a means of survival.
To others, (those obsessed with it) it's the source of power. Ergo, of course you can have too much money, since it is physically impossible to spend it. But at the same time, you cannot, if so compelled, have too much power.
Put simply, it is unadulterated GREED. An addiction, if you like.
And for that, there is no cure.
B.J.
morgey -> The Hope , 3 Jun 2018 18:02
'Aspiring to become rich' is the most vapid of all aspirations.
francis nongham , 3 Jun 2018 18:00
Privatization is one method of stealing the people's assessts and giving it to the wealthy through ownership of shares. The Lieberals talk of mum & dad investors yet 98% of Australian shares are owned by the wealthiest 1%
Rob Robinson , 3 Jun 2018 17:59
There are so many who believe they will benifit from these ideologies , that they reinforce those who promote them . They simply don't realise they are not part of the equation , and any benifit gained by them is simply incidental. The target recipients have always been the Corporate bodies and those with their finger in the pie . Not once , to my recollection, has the Australian people , in general terms , benifited from the sale of public companies , banks or infrastructure .
ramAustralia , 3 Jun 2018 17:56
Brilliant article, hits the nail on the head! Australia really did go "off the tracks" with the regime of John "Mugabe" Howard with a system of patronage, corruption, and systemic bribery which gave us a third world government. Like other "mineral resource rich, failed states" the nation's wealth has been mostly stolen.

[Jun 06, 2018] Seven signs of the neoliberal apocalypse Page 3 of 10 Discussion The Guardian

Jun 06, 2018 | www.theguardian.com

BlackAbbott -> ID2778880 , 27 Apr 2018 04:31

It's not about money. Ultimately, it's not even about the financial system.


But it is about money and about the financial system.
Neo-liberals see things as a dollar value only nothing else is of value. The fact that Macro economics is a social science is discarded and Micro-economics covers all that is of value. The financial system is critical because it is based on lies publicly. This is one of the reasons that power may indeed be defining. But the reason behind it is the lies of finance. The key ones being tax does not fund government and banks create instant money when they give a loan. The repayments cancel the money creation they do not get collected and put out as new loans. Like wise when the federal government spends it also creates new money and drains ot away by tax which destroys it. The federal government cannot save for a rainy day. Another financial one that needs dumping is the lie that a surplus is good. It is not. So yes finance is critical Power is a symptom of the lies. Not the cause.
As soon as they reality is accepted the whole driving force of neo-liberalism falls to bits. It is exposed. Its reason to sell assets vanishes (federally) The passing of costs to the states shows as political crap.
ID2778880 -> BlackAbbott , 27 Apr 2018 04:16
It's not about money. Ultimately, it's not even about the financial system. The real showdown will start with the fight over energy and resources.

Tightening energy and resource supply, associated with environmental degradation to obtain those resources and a still increasing world population will be the death of neo-liberalism. But in my view, it is unlikely to be replaced by Communism.

Laurence Bury , 27 Apr 2018 04:20
We would have to look back to before the OPEC oil shocks of the early 1970s and the emergence of the Asian Tigers to see a different model of capitalism dependent on the West having a competitive industrial base with mass employment therein.
Hence, it is Varoufakis who is an old skool, radical chic of precisely this era and the sub-concept of neoliberalism is only of use to neo-Marxists like himself. Perhaps he can go and govern class relations (or foment their conflict) in apparently thriving Australian industry however?
MuzzaC -> curiouswes , 27 Apr 2018 04:11

I believe fraud and corruption caused the great depression.

But this is a part of the myth of the free market. If a market is truly free, those with enough money will always be able to influence the market for their own benefit. As soon as this happens the market fails in its chief function of efficiently allocating scarce resources. That's why there are regulators and anti-monopoly legislation, etc. etc. We pay billions each year to keep capitalism from eating itself.

Self-serving behaviour is only corruption if it is illegal, otherwise it's called business. It is regulation that makes it illegal, which is why we need strong, democratic control.

So saying that the GD was caused by corruption is the same as saying that free-market capitalism got out of control of democratic regulation. Same thing, different name.

AdelaideRose , 27 Apr 2018 04:10
The end of neoliberalism can't come soon enough for me. People and communities have been destroyed for the benefit of a few who don't care about anything other than their own wealth and power. Time to give the power to the people.
curiouswes -> Powerspike , 27 Apr 2018 03:24

THIS is "neo-liberalism"

not to me; I think you have a conglomerate of ideas and policies, some of which I'd categorize as neoliberal, but things like "extreme individualism" have nothing to do with neo liberalism per se.

I think if you give too much power to the state, you'll wind up with authoritarianism. maybe that doesn't concern you, maybe it does. I believe in the concept of labor unions. However I also believe in freedom. It may not be in our long term interest to give up freedom for the sake of a better economic prospect today.

HauntedTupperware , 27 Apr 2018 03:18
It's not going to happen Van. Unfortunately, this is a globally integrated system, which dwarfs the power of national politics and national economies, with maybe the exception of the US, and look what's going on in the US. Donald Trump is the president. I mean, what does that say about the United States, that they've elected a leader like Trump? How does the saying go, "Cometh the hour, cometh the man?" I guess they must have a death wish, unfortunately, they're going to take mos of the world's population with them. I'm not necessarily a pessimist, but I think a rational analysis leads to the conclusion, that we're doomed.
vanbadham -> discuz , 27 Apr 2018 03:13
The neoliberals in the West - unlike, disgustingly, those in South America - won hegemony because they did as Gramsci and Dutschke advised the left; they made "a long march through the institutions". Journalists, histoIran's, philosophers and academics were as necessary to the movement as economists and politicians. It was what enabled them to win elections. As the man said - "from the prophets, deserts come."
woddles -> curiouswes , 27 Apr 2018 03:13
So, no point?
Marxism was a suggested response to rampant capitalism where only the very few at the top benefited from the toil of all others.
I would have thought it was obvious. Or maybe you don't understand Marxism?
TWOBOBS -> AndyPe , 27 Apr 2018 03:10
I would suggest you're not on the bottom of the pile either, if you are reading the Guardian and commenting on a computer or an iPhone. The reality is, capitalism has seen the halving of world poverty levels over the last 30 years, and poverty continues to fall. Are there serious problems with inequality in the west, and the world generally? Yes. Capitalism needs to evolve. Better tax regimes and systems for wealth redistribution are needed. Communism is not the answer.
nogapsallowed , 27 Apr 2018 03:01
Every political party is a "collective" of sorts. But as far as I can scan the wasteland of Australian politics, I can't find any that is shining a path towards "freedom and enjoyment."

We need to reconceive politics just as we must the banks, churches and other terminally infected institutions of our time.

Ramsterbigboy -> Kinxil , 27 Apr 2018 02:58
"but let's stop being full anti elite, neo liberalism allowed several, unfortunately not all, of us, to feel a bit special."

That is not Van's or the Guardian's way.

Van how many "people hate it"? have you counted them by any chance?

Powerspike , 27 Apr 2018 02:52
Neo liberal practices i.e. their 1% stranglehold on the economy, their ideology of winner take all, etc are incompatible with a modern nation state, with civilised values, and with a harmonious society.
They are destroying the state and society.
BlackAbbott -> curiouswes , 27 Apr 2018 02:52

Unfortunately many don't care about truth.


And that is the reason we have neo-liberalism. The truth is not seen.
Awabakali , 27 Apr 2018 02:51
The simplest and most apposite critique of unbridled Capitalism is that is ideologically bound to the notion that consuming is good, increased production and use of finite resources is good, cheap labour is good, tax is bad, and sharing is bad...and that if Capitalism continues apace in its present form it will lead to the total pollution of the earth, the disappearance of all wild animals and plants, the end of bees and pollination, the rise of rampant diseases uncontrolled by drugs that are not affordable to the world's poor, and the eventual extinction of humans. Capitalism is not only dangerous, it is myopically spectacularly insane. Psychology demonstrates that humans have 3 classic responses to a crisis:

1.Denial
2.Fantasy
3.Acceptance of reality and action


1980's Denial phase: "It is exaggerated by mad greenies and ain't happening."

1990's Fantasy phase: "Recycling and prayer will fix it all."

2018 Reality and Action phase: "We are in deep shit....literally...and we need radical immediate action by governments, corporations, educational institutions and individuals to save the planet and us. Want your great grandkids to be alive in 2080? Then get out there shouting....TODAY!!!!!

Kinxil , 27 Apr 2018 02:49
"People hate it". That kind of sentence which make you consider closing the tab. Your point is sensible, neoliberalism has generated lot of bothering issues, but if it didn't exist, I wouldn't have an affordable car and computer, and I wouldn't have a giant amount of choice for goods to consider. It's time it ends, or rather rethink itself, but let's stop being full anti elite, neo liberalism allowed several, unfortunately not all, of us, to feel a bit special.
TWOBOBS -> jungney , 27 Apr 2018 02:38

No-one group or class is but collective action will create a far brighter and healthier future than the current regime of every woman for herself.

There is nothing stopping people now getting together into cooperatives/collectives/communes to start businesses, buy homes, job share.

[Jun 06, 2018] Is fascism a logical next stage of the collapse of neoliberalism, like hapened in Waimar before?

Jun 06, 2018 | www.theguardian.com

quintal -> Alpo88 , 3 Jun 2018 15:56

Hi Alpo

Fascism is the word that most interests me when looking a the present trajectory in Australia

We're not there yet

And there's no one on the government benches who's a new Hitler or Stalin or Mussolini

But the next generation ..............

They make me uncomfortable. Some of the younger and as yet unheralded apparatchiks on the conservative fringe worry me. They're smart. Know the advertising and selling the message strategies. Have money and are well connected to the barons/oligarchs who pull the strings and they're ambitious.

Paradoxically a collapse of the Liberal Party will help them. In spite of it all we need a fiscally conservative, slightly socially conservative political movement in Australia but the drift to extremism is quite pronounced and profoundly worrying, especially in a time where climate change poses existential questions about our future.

This next election will not be a cakewalk. It'll be as bitterly fought as any in a generation and the consequences of a loss will be, for progressive forces, catastrophic.

cheers

Alpo88 , 3 Jun 2018 14:58
"Although people with low expectations are easier to con, fomenting cynicism about democracy comes at a long-term cost. Indeed, as the current crop of politicians is beginning to discover, people with low expectations feel they have nothing to lose."..... Yes, but that's part of the Devilish Plan: Why do you think that the Neoliberals and Conservatives spend so much time nurturing their relationship with both Police and the Army?.... They want to be sure that if their Neoliberal-Conservative project goes truly belly up, they will be the ones holding the guns.

Yes, it's sinister.... it's dangerous.... it's a time bomb, and we can only defuse it with the help of a majority of Australians waking up, standing up and Democratically vote against Fascism.

[Jun 06, 2018] Inverted totalitarism described by a Guardia commenter

Jun 06, 2018 | discussion.theguardian.com

Bearmuchly, 3 Jun 2018 16:37

Despite the huge changes in communication in the last several decades and the ever increasing levels of education in our society, politics have failed to engage the vast majority and that cohort of the cynical, the alienated, the disinterested, the lazy, the simply care less continues to grow.

In the last decade the only cause that evoked passion and engaged a larger number, finally forcing our elected members to act was same sex marriage .....a crescendo that took years to generate.

With the complicity of our media and the decline of that part of education that teaches analysis, social psychology and political philosophy (let alone teaches about basic political structures and mechanisms) our level of disengagement from the political process appears to be at an all time high. The performance of our legislators has become increasingly unaccountable and purely self interested .... we have re-created the "political class" of pre-war times where alienation was based on a lack of education and awareness and a sense of inferiority and powerlessness DESPITE our vastly improved communication, access to information and educational standards (not to mention affluence).

Basically, we have "dumbed down" to the extent where passion and ideology in politics is now the preserve of fewer and fewer. In a democracy this trend is of massive concern and a threat to its sustainability.... it also completely suits those that are focused on concentrating power and wealth... the more that don't give a toss the less likely you are to be encumbered by limitations, social considerations, ethics and morality.

Until we re-engage far larger numbers into the political process, raise the levels of awareness of political thought and choices, stop dumbing down and re-inject some broader passion and participation into our political processes then vested interests will continue to dominate.....and democracy will become increasingly undemocratic !

[Jun 06, 2018] Nationalism is a decision-making tool as it always poses a question; what is good for this country ?

This is not true: this question "what is good for the country" very soon mutates to "what is good for nationalists"
Jun 06, 2018 | discussion.theguardian.com

DesignConstruct -> quintal , 3 Jun 2018 17:39

We need a Nationalist government, which will automatically see itself as the mortal enemy of the primary Internationalist (there used to be a song about that) force in the world today, and which affects us greatly in terms of resource exploitation: Globalisation, or what we used to call 'multi national corporations' or 'international capital'.

Nationalism is a decision-making tool as it always poses a question; what is good for this country ?

DesignConstruct -> Alpo88 , 3 Jun 2018 17:24
http://www.heraldsun.com.au/news/opinion/we-need-real-leadership-and-real-democracy-from-our-politicians/news-story/f37a3a3951aa78df86892c71166fdbb5

When/if he mentions de-Globalisation, an Aus-Indonesian defence alliance, citizen initiated referenda, and a Constitutional ban on donations and parties , then people may listen, however he cannot be accused of being too imaginative or bright. He is however advocating authoritarianism not fascism.

quintal -> DesignConstruct , 3 Jun 2018 17:16
Hi DC

I halfway agree

We're not there yet

But .......

Fascism doesn't require a state sanctioned religion or suppression of religion

That said the Catholicism/fundamentalist Christian bent of the present cabinet and the demonisation of any green beliefs is uncomfortably close to what you describe

And the nexus between big business and govern, the destruction of public institutions, the reduction in the capacity of media to report truth and the vitriolic attacks on opponenents are straws in an ill wind

Cheets

Alpo88 -> DesignConstruct , 3 Jun 2018 17:11
You are right, it's not "fascismmmmmmmmmmmmmm".... it's Fascism. Which brings back to my memory what Tom Elliott (the son of Liberal Party former president John Elliott) wrote in the Herald Sun on 6 February 2015: "It's time we temporarily suspended the democratic process and installed a benign dictatorship to make tough but necessary decisions."

[Jun 05, 2018] Jim Chanos on Fraud "Cryptocurrency Is a Security Speculation Game Masquerading as a Technological Breakthrough" naked capit

Notable quotes:
"... By Lynn Parramore, Senior Research Analyst, Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website ..."
"... Jim Chanos, founder and managing partner of New York-based Kynikos Associates, has spent much of his career studying financial fraud. He shares his thoughts with the Institute for New Economic Thinking -- where he is a member of the ..."
"... Global Partners Council ..."
"... -- on cryptocurrency, fraud coming from China, and why fraudsters may currently be on the rise. Chanos teaches a course on the history of financial fraud at Yale University and the University of Wisconsin. ..."
"... down with the blockchain ..."
Jun 05, 2018 | www.nakedcapitalism.com

Jim Chanos on Fraud: "Cryptocurrency Is a Security Speculation Game Masquerading as a Technological Breakthrough" Posted on June 5, 2018 by Yves Smith By Lynn Parramore, Senior Research Analyst, Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website

Jim Chanos, founder and managing partner of New York-based Kynikos Associates, has spent much of his career studying financial fraud. He shares his thoughts with the Institute for New Economic Thinking -- where he is a member of the Global Partners Council -- on cryptocurrency, fraud coming from China, and why fraudsters may currently be on the rise. Chanos teaches a course on the history of financial fraud at Yale University and the University of Wisconsin.

Lynn Parramore: As someone who pays a lot of attention to financial fraud, you've noticed that this activity has a connection to business cycles. Can you explain that and say where you think we are right now?

Jim Chanos: I've found in my research and my teaching that what I would call the "fraud cycle" -- instances of large-scale financial fraud over multiple platforms and companies in the financial markets in the modern era (the last 500 years) -- follows the financial cycle with a lag. That means that as business and particularly financial markets improve, peoples' sense of disbelief and caution that they've often earned from the previous downturn begins to erode. Schemes that before might have seemed too good to be true begin to be embraced.

LP: So people relax their financial vigilance.

JC: Exactly. The longer the cycle goes on, the easier it becomes for the dishonest and the fraudsters to ply their trade because people will begin to believe in things that they shouldn't financially. As cycles go on, we tend to see higher instances of fraud. In recent memory, there were clearly, from a legal and prosecutorial point of view, more cases of fraud after the dot-com bull market of the late '90s, which went from 1991 to 2000. Many of the dot-coms turned out to be fraudulent. We then saw the Enrons and the WorldComs and the Tycos. Frauds generally come to light after the financial cycle turns down. We saw this again after the crisis following the bull market of 2003 to 2007.

What happens is that the new capital going into these things dries up. Many frauds are, by their nature, Ponzi schemes that require new money and new investors to pay off the old investors. When people want their money back, the insolvency of the venture is discovered. John Kenneth Galbraith has this wonderful term called "the bezzle" [inventory of undiscovered embezzlement]. That's the heart of the fraud, the nature of the fraud in the company. He points out that in the up phase, there's this wonderful period where both the fraudsters and the defrauded think they're getting richer. An interesting observation, right?

Of course, it works the other way on the down side. That's what I mean when I tell my students to follow the cycles and be on guard the longer a financial and business cycle lasts because people will get a little bit jiggy with their capital. They're willing to take risks, willing to believe things. So today we've got bitcoin and ICOs [initial coin offerings], which went ballistic in 2017. I suspect going forward we're going to see more and more evidence of questionable companies as this bull market keeps advancing and aging. We're now nine years into this bull market, same as the '90s, so I suspect that now things are starting to percolate. I think bitcoin and the ICOs are just one manifestation of that.

LP: I just passed a huge crowd gathered around the New York Hilton Midtown for "Blockchain Week NYC," a series of events put on to showcase the city as a hub for blockchain jobs. You could feel the excitement in the air with all the attendees and reporters jostling on the sidewalk. What's your take on all this hype?

JC: At one blockchain gathering there were a set of rented Lamborghinis parked outside to entice the traders and day traders and retail investors: this, too, can be yours if you hop aboard the blockchain and bitcoin bonanza!

I teach about a guy from the early 18th century called John Law. He was the architect of one of the great financial frauds of all time -- the Mississippi scheme of 1718-20 in Paris. (He's also the guy who founded New Orleans. He sent settlers there who named it after his benefactor, the Duc d'Orléans).

Law was the first person to write about the need for foreign governments to have fiat currencies and not be tethered to gold and silver. Because of the power of taxation and the power of the governments through enforcement and force of arms, they could enforce their currency to be used, and because of their ability to expand the monetary base and do all the kinds of things that central banks now do, it was in their best interest to do so.

This was revolutionary back then. Law's failed experiment, which added lots of fraudulent bells and whistles to that scheme in France, put the idea on the backburner for a while. But economic historians have revisited it now and his early papers are genius. They're up there with some of the stuff Keynes wrote in the 20th century in terms of the way he envisioned monetary systems to work. Law points out sort of obliquely the positive ways in which the citizenry would come to accept and trust paper money. Not only would the power of the state compel you to accept it, but the power of the state also acted as a third party to adjudicate problems, fraud and act as a lender of last resort in times of crisis instead of going down into a deflationary spiral. That was the positive side.

In the new bitcoin and crypto-craze, the whole idea is that we need to get away from fiat currencies by creating our own fiat currency for which there is no lender of last resort, no third party adjudicator. For those who believe it's a store of value in the coming apocalypse, the idea is that you're going to have to safeguard your key under a mountain with fingerprint and eye scan security while the hordes are outside your bunker trying to get in to use it -- for what, I have no idea. Because for those who believe that you need to own digital currency as a store of value in the worst-case scenario, that's exactly the case in which a digital currency will work the least. Food would work the best!

LP: Sounds like a libertarian fantasy.

JC: That's exactly what it is. And if you say, well, fiat currency is going to bring the world down, which could, of course, happen, then I say the last thing I'd want to own is bitcoin if the grid goes down.

LP: It also sounds like the perfect realm for people looking to commit fraud.

JC: Well, there you go. Bitcoin is still the area for people who are trying to avoid taxation or other examinations of their transactions. That's one thing where I think it probably still has utility, but the governments have figured that out.

Last year, just as the mania was really going, an early convert who had gotten in early and had made a lot of money wrote this humorous blog about trying to cash in his winnings, if you will. He chronicled telling the exchange that he wanted to convert his bitcoins into U.S. dollars and have them wired into his U.S. bank. It took something like eight or ten days and numerous follow-ups and phone calls. The funniest part was his having to fax his passport to Lithuania.

LP: That doesn't sound very high-tech or efficient.

JC: Exactly. Using a fax machine to Eastern Europe struck me as kind of the antithesis of what you're trying to do here. So this is simply a security speculation game masquerading as a technological breakthrough in monetary policy. Someone at Grant's interest rate conference recently said that it was as if we had intentionally created a "monetary Somalia."

LP: So buyer beware.

JC: I think so.

LP: You recently appeared in a fascinating documentary, " The China Hustle ," which concerns the reverse merger boom in which I believe 400 Chinese companies came to market on the U.S. stock exchange. Can you say a bit about what these mergers are and how U.S. investors got conned?

JC: A reverse merger is simply when the company in question merges into a defunct, U.S.-listed corporation, typically on NASDAQ, which has been moribund for years but has still been filing with the SEC, so it may have a listing somewhere.

We can see these reverse mergers in the late '90s when they became dot-com companies, and also in the late '70s, when gold was a hot asset and they became gold mining companies. In the last ten years, they started to appear to take advantage of the growth of Asia and the growth of China. It's very easy to sell small, retail investors on this idea. It sounds very appealing.

What happens is you merge the Happy Flower High Tech Company into some defunct company and you rename the old company with the Chinese name. Voila! The Chinese company is now public in the U.S. without having to file an IPO [initial public offering] prospectus with the SEC. You don't go through underwriters, a due diligence process, or a vetting process where the SEC asks questions on the IPO. But you now have a company on NASDAQ or the U.S. Stock Exchange.

This is what "The China Hustle" was about -- this raft of companies that merged with companies you've never heard of and created, instantaneously, reasonably large-capitalization companies operating in China but trading in the U.S. Of course, therein lies the rub. How do you really know what was going on in the operating company? How good was the accounting? How good were the representations of the outside auditors and representatives of the boards? It turned out that a lot of them were frauds.

LP: So I'm an investor and I hear that this Chinese company has come to market in the U.S. and it has been audited by Pricewaterhouse, Deloitte, or some other well-known auditing firm. I think it must be legit. What's wrong with this assumption?

JC: There are two big problems there. When people always ask me about the large frauds we've dealt with, they ask, who were the auditors? And I say, who cares? Every great fraud was basically audited, most of the time by major firms. In China it's even worse than that because although the statements might say Pricewaterhouse, if you read the fine print it actually says, "Pricewaterhouse reviewed the work by an affiliate in China." So it's often a smaller firm that has a relationship with the big firm that actually does the auditing. Pricewaterhouse just puts its stamp of approval on that.

LP: Sounds kind of like what the big credit ratings agencies did by giving triple-A ratings to securities that were fraudulent in the lead-up to the financial crisis.

JC: Right. But you have to remember that auditors are not the financial check that most people think they are. The financial statements are not prepared by auditors. The financial statements in publicly traded firms are prepared by management and the auditors review the statements. Unless they have reason to believe something is amiss or are pointed to something being amiss by a whistleblower or short seller or journalist, they're not going to detect anything most of the time.

LP: Auditors are not detectives.

JC: No they're not. They're really paid by the company to review the company's own financial statements. So at the end of the day, this still comes back to the management and the board. Do you trust them? Do you believe what they're telling you? What is your ability to check?

LP: In the case of the Happy Flower Company, I can't really check.

JC: Not only that, one of the points that the movie made very well was that even if you find the smoking gun and the chairman runs off with all the money and you're left with nothing, the recourse to western investors is virtually nil. None of these CEOs are prosecuted. The view of the Chinese court system, which, I should point out, is an arm of the Communist Party, not the Chinese state, is, "sorry, but no jurisdiction here. You're a western investor and you ought to know better."

LP: Can the SEC do anything?

JC: The SEC did announce a crackdown after the fact, but besides monitoring companies' ongoing disclosures and trying to halt trading in the securities if there is evidence of a problem, there isn't a lot that the SEC can do. These are Chinese companies.

LP: How do you view the climate for financial fraud under the Trump administration? I note that Trump's SEC nominee, who was sworn in as chair last May, was an Alibaba IPO advisor -- the Silicon Valley lawyer Jay Clayton. You've expressed skepticism about Alibaba.

JC: I have, and so far I've been wrong, at least with respect to the stock price. But I challenge anyone to explain to me cogently what Alibaba is doing with all its capital and flipping companies back and forth to insider and revaluing the prices of companies upward.

Be that as it may, the real issue is, what is the sense of the administration? I'll say one thing, when the George W. Bush administration started -- remember, he was the MBA president -- he came in on a pro-business platform and was seen as very pro-business and anti-regulation, similar to the Trump administration. But when the wave of fraud started hitting in '01 and '02, I have to give the John Ashcroft Justice Department a lot of credit. They did a 180 and went after the bad guys hard.

I always joke that the two presidents who have put more executives in jail than all the rest combined were both named Bush. W's father was instrumental in prosecuting the S&L [Saving and Loan] crooks back in the early '90s and put about 3,000 of them in jail. I think they realized that the public was losing money in the stock markets, not just because of the frauds, but because the long dot-com bull market had ended. People were upset. Then when you had the revelations of WorldCom and Enron on top of it, there was a sense that every corporation was crooked and this was going to have exogenous impacts on the economy and the market as a whole. I think they correctly realized that we've got to basically show that we're the cops on the beat. And they did.

That did not happen, as you well know, after the GFC [Global Financial Crisis], for lots of reasons, including a Justice Department that actually took the extraordinary step of admitting that it considered economic and financial market factors in figuring out when, or if, to prosecute a company. So justice now had an economic angle to it. We sort of know how we think about the Trump administration -- I noted the other day that the Education Department seems to have shut down its division investigating fraud at the for-profit education companies, which are one of the biggest cesspools out there in terms of financial fraud and fraud upon the taxpayer. So that's not a good sign. On the other hand, public opinion can move things quickly as it did in the Enron case. We saw a real stepped-up effort to go after the bad guys.

I think a lot depends on circumstances at the time. We're still in the expansionary phase of the financial cycle and, arguably, the fraud cycle, so we'll have to see what happens once that rolls over.

LP: Let's talk about emerging markets. Do you think a big crisis could develop as investors head back to the U.S. as the Federal Reserve raises rates here?

JC: The emerging markets are always sort of the end of the wick, right? They always go down the most when fear is out there and they go up the most when people are euphoric. Emerging markets had a really rough go of it from 2011 right on to 2015. They never really recovered a lot from the GFC. Then someone hit the light switch and whether it was things changing in Brazil or [former president] Jacob Zuma being ousted in South Africa or South America turning the corner. I would note that Argentina issued a one hundred-year bond a year ago that was oversubscribed, and this week Argentina went back hat in hand to the IMF [International Monetary Fund], so we've had this amazingly quick shot across the bow in the emerging markets. We'll see if it's the start of something bigger. But it's sort of amazing to me that after only a two-year respite, places like Argentina and Turkey seem to find themselves in trouble again. Time will tell.

LP: One thing you said in "The China Hustle" is that we've never seen a credit build-up like the one we've seen in China today that hasn't been followed by a major financial crisis. That sounds pretty worrisome.

JC: I'm always told confidently it won't matter because they owe it to themselves. Well, if that was that were the case, then Zimbabwe would be one of the wealthiest countries in the world today!

The build-up of China's debt and the speed of that build-up is nothing short of stunning. There's a new book that I recommend, " China's Great Wall of Debt ." It does a great job of chronicling just how massive this build-up has been in the last ten years following China's stimulus in '09 to pull the world out of the GFC. You've heard me call it the "treadmill to hell" because you have to put more and more debt on the books to keep the growth going and this is where China is finding itself. If they don't increase the debt, the economy hits stall speed and for all the talk about innovation and technology and transferring to a consumer-driven, technology-driven economy, the evidence on that is kind of scant. It's still basically an economy driven by debt-driven investment, which is still over 40% of GDP. I think when we started talk about China it was 46% and I think the most recent number is about 43%. So it's improved slightly over the eight or nine years, but not much.

China is still basically a giant construction site and shows no signs of changing. In fact, with the One Belt One Road Initiative [a project launched in 2013 to develop trade routes to connect China to the world], they're trying to basically export their construction capabilities and credit to countries along what we would call the Old Silk Road.

LP: In terms of the overall picture of fraud, are we any better off than we were after the financial crisis?

JC: Personally, I think we're worse off. I think we were better off after the dot-com era. Not because we enacted Sarbanes Oxley [passed by the U.S. Congress in 2002 to protect investors from fraudulent corporate accounting activities] but because the public saw that there was justice. The bad guys got caught and at least if I lost money, they paid the price of their freedom. That never happened in '08 and '09 for a variety of reasons. We've just had a continuation of the cycle and the cycle is still going.

LP: So fraudsters are emboldened?

JC: Right. And now we come back to bitcoin. What's your recourse if you lose money in an ICO traded on an exchange offshore? If people lose lots of money, there will be an outcry, but no recourse. So we're building into something. I suspect it's in front of us and it will be interesting to see what happens.

LP: What happens in a capitalist system to good people who want to behave ethically? How can they succeed in an atmosphere in which fraud and unethical behavior are constantly happening?

JC: I think capitalism is still the best game in town, but the very best games have good sets of rules, and, even more importantly, good umpires and referees. When the game becomes tilted and the house has the advantage, people tend to stop playing.

When the system is seen as corrupt or dishonest, there's a political price. We saw this after the GFC. People in New York and San Francisco and Boston might be fine with everything, but in the South and Midwest, where you're from and where I'm from, there's still this general sense that "the bastards got away with it and I'm still suffering." So there is an exogenous cost to this where people don't feel that there was justice. They feel that they were taken advantage of by those sharpies on the coasts. It brings out some of the worst in people, of course, so that's one small step, then, away from social problems like anti-Semitism and anti-immigrant feelings. It's us v. them. Nobody is looking after us.

Economists and financial analysts have a hard time quantifying all these things, but I think that the point is that fair markets where there's a set of rules, where there's a cop on the beat, where there are regulators making sure that people are adhering to the rules, are far better markets than one in which caveat emptor is written above the casino. I think it behooves us as a society to understand that capitalism is an amazing driver of progress and prosperity and wealth, but it can be diverted. There's a dark side to it if we don't play by the rules and if we don't encourage capital formation from all members of society who don't feel they're getting a fair shake.

Everybody gets that capitalism involves risk-taking. But the asymmetric situation where people who are dishonest get away with it while people who are honest and provide capital get left holding the bag will really stunt capitalism. I think that's the issue which the vigilance on fraud, why it's so important. It is part of the capitalistic system. There will always be people trying to take advantage of other people. It's still better than when the whole system is flawed, like totalitarian communism, where corruption starts at the very top in terms of the planning itself. But on the other hand, the counterfactual is that it could be so much better if everybody is participating and understands that there is a strong set of rules and penalties when you break them and justice as well. That's what I think has been lacking in the last generation.


ChrisAtRU , June 5, 2018 at 10:57 am

Ha! Timely from Izabella Kaminska today:

Only in cryptocurrency can an enterprise that calls itself "ethical" be represented by someone who is both an "award winning journalist" and "PR relations" pic.twitter.com/9lMcXPWSb3 -- Izabella Kaminska (@izakaminska) June 5, 2018

flora , June 5, 2018 at 11:55 am

Tasnim should have contacted Osborne's London Evening Standard, not the FT. ;)

Ignacio , June 5, 2018 at 12:15 pm

Ethical cryptocurrency!!!
Sounds great, hahahahahahahahahahahaha!

So, we have learned two things lately about things that will happen when the crisis unfolds:

– There is high risk for a deflationary wage spiral
– The fraudsters won't be (again) prosecuted

ChrisAtRU , June 5, 2018 at 6:37 pm

Don't laugh so soon This came across my Twitter feed a couple days ago, and I was a little taken aback.

I really like the idea of community currencies, but I'm wondering why on earth you'd want to get them tangled up with blockchain for the purpose of trading/conversion ?

Needless to say, the usual suspects have chimed in.

#HowCanIMakeMoney

Just make a Global CC and have that be that or am I oversimplifying this? #OrHaveIMissedSomething

PS: I also take exception to using the term Bancor as well, given what it's original purpose was. Not too sure #JMK would be down with the blockchain .

Lambert Strether , June 5, 2018 at 11:39 am

I think of "The Bezzle" as the happy time between hubris and nemesis.

Wukchumni , June 5, 2018 at 12:21 pm

Why wouldn't a Zimbabwe type country embrace cryptocurrency as money of the iRealm?

Seems like it wouldn't be that hard to get outsiders to believe in it, as long as it was pretty vague, and most wouldn't know that the very same country issued $100 Trillion banknotes not so long ago.

Synoia , June 5, 2018 at 1:42 pm

Why wouldn't a Zimbabwe type country embrace cryptocurrency as money of the iRealm?

Because 50% of the people DO NOT HAVE ELECTRICITY.

If the do have electricity, they cannot afford to Verify a Cryptocurrency.

Before making comments about 3rd world countries, visit a few, a look outside the tourist areas.

Soweto or Alexandria near Joburg, or the Township on the East side of Boksburg in South Africa.

Or The area near Apapa, Nigeria close to the Mobil Tank Farm.

Wukchumni , June 5, 2018 at 1:48 pm

as if you need a physical location within a country, in order to make cryptos~

They're mining bitcoins in Inner Mongolia, for instance.

Wukchumni , June 5, 2018 at 2:14 pm

p.s.

Zimbabwe didn't need printing facilities when they were cranking out oodles of currency, as it was all printed in Germany. (who got stiffed on payment, if memory serves)

Jim Haygood , June 5, 2018 at 12:25 pm

'John Law was the first person to write about the need for foreign governments to have fiat currencies and not be tethered to gold and silver. Law's failed experiment, which added lots of fraudulent bells and whistles to that scheme in France, put the idea on the back burner for a while. But economic historians have revisited it now and his early papers are genius.' -- Jim Chanos

This is bizarre historical revisionism. John Law didn't add "fraudulent bells and whistles" -- fraud was the whole point of fiat currencies, then [1720 -- Mississippi bubble] and now.

Fiat currencies were born in original sin, that is. When Bubble III blows like Kilauea, the central banksters who engineered this global calamity may find themselves (like Law) involuntarily expatriated by angry mobs of peasants with pitchforks.

Got gold?

PKMKII , June 5, 2018 at 2:11 pm

Currency is born in sin, and may only be cleansed by the divine power of God, err, Gold. Only by having supreme faith in its shininess will your economy be saved. Do not question how or why, as Gold works in mysterious way. Au men.

diptherio , June 5, 2018 at 3:55 pm

That's the best pun I've seen in awhile!

skippy , June 5, 2018 at 4:07 pm

I don't understand Jim . central banks have been staffed largely by monetarist and quasi monetarists throughout the entire neoliberal period. Then you have the vast majority of the politicians holding the same view.

But anyway I thought quality held true in both cases, so what agenda threatened the quality of fiat – at onset. I mean what mob forwarded all the innovation [tm], completely ignored poor or criminal underwriting standards, completely miss-priced risk, was completely oblivious to obvious gaming everything for "personal" profit.

I really can't see how fiat forced some people to act in such an anti social manner by its will alone. I mean that sort of broad social dominance is usually reserved for social narratives.

Sorry but I really never understood the logic behind the money did it thingy .

Isotope_C14 , June 5, 2018 at 1:40 pm

"like totalitarian communism"

I do wonder about folks who describe alternative forms of governance with a very clear lack of understanding of political/economic arrangements.

You can't really have a totalitarian communism. Chanos should do some history homework on what the USSR was, and why the system was doomed to fail starting all the way back with Lenin. Lenin didn't believe that the Russians were ready for the revolution, he considered it a holding pattern waiting for the revolution to happen in Germany.

Just because you (or an autocrat like Stalin) call something a communism or socialism, doesn't make it so.

"But the asymmetric situation where people who are dishonest get away with it while people who are honest and provide capital get left holding the bag will really stunt capitalism."

Good. I can't think of any better evidence that the system is archaic and if left unchecked eats itself. Chanos might think about re-reading some Marx.

Tim , June 5, 2018 at 2:38 pm

Brilliant!

Sadly, there will be plenty of people LFIN right up to the coming RIOT as a consequence of the autopiloted crash from the fraud.

Micky9finger , June 5, 2018 at 2:46 pm

Whenever i get to Zimbabwe in an article i stop reading.
A sure sign the economics is going off the rails into neoliberalism and argle bargle.

Rates , June 5, 2018 at 4:11 pm

"I'm always told confidently it won't matter because they owe it to themselves." Isn't that the basis of MMT? Heck, that means Murica is heading towards eternal prosperity.

djrichard , June 5, 2018 at 4:31 pm

I'm still wondering if the long game is to use a crypto currency as a petro currency, to supplant the US dollar. That way, countries (and corporations) with trade surpluses with the US can hoard their surpluses in the crypto-cum-petro currency rather than US assets (bonds and stocks). In an asset that has neutrality with respect to any nation state. Just like gold used to have.

djrichard , June 5, 2018 at 4:42 pm

There's a book that suggests this line of thinking, but doesn't really seem to chase it down adequately: https://www.amazon.com/dp/B07BPM3GZQ . See review on Frances Coppola's website.

RBHoughton , June 5, 2018 at 7:34 pm

There is a 25 minute clip here that describes the creation of money and the recording of transactions (the blockchain) and does not seem fraudulent in any way:

https://www.youtube.com/watch?v=bBC-nXj3Ng4

[Jun 05, 2018] Italy experiences the same results of neoliberalization as the USA including deindustrialization and high unemployment

Notable quotes:
"... From what other authors say, and what seems far more reasonable, demand has collapsed because the corporate locust is doing the same thing they are doing in America, namely destroying the entire industrial base and leaving a wasteland of debt and unemployment. Add to that an inability to have a monetary policy and it's game over: ..."
"... Luca Cordero di Montezemolo, a former chairman of Ferrari, Fiat and Alitalia, and now a public enemy because of his dismissal of the "Made in Italy" label, acquired both companies and moved them to Turkey, choosing profit over quality -- and Italian jobs. Montezemolo, of aristocratic background, is a champion of Italian neoliberalism, having founded the influential "free market" think tank Italia Futura (Future Italy) in 2009. ..."
"... That is a fallacy that lies at the heart of the current European crisis. (I agree with the other things you wrote.). It is not the 'supply', but lacking demand that is constraining growth. All supply and higher productivity solutions are based on more 'flexible' labor, removal of barriers, including borders, more 'competition' in everything. That translates in practise into working more for less. ..."
"... What Europe (and West in general) need is a very tight labor market. By all means, cut and simplify taxes, abandon austerity, promote some inflation, but the main reform that is needed is to restrict outside labor migration and simultaneously restrict outflow of work. That is explicitly anti neo-liberalism, it is also at the heart of the populist appeal. ..."
"... Left has completely lost its way with its inability to distinguish between its local voters and the feel-good charity towards the rest of the world. They are in effect being used by the most anti-left business interests to keep labor as cheap as possible. Power to negotiate doesn't come from institutions – it comes from having a strong hand in the labor demand-supply equation. ..."
"... Given the left collapse, the future is with the nationalist political forces. Trump understands it, so does Salvini, La Pen, Orban, The names might change, but unless democracy is completely abolished the 'selfish', restrict cheap labor politicians will eventually prevail. ..."
"... Capitalism seeks to concentrate capital and maximize profits; ..."
"... The economic system in place today is not sustainable. In the not so distant past, products exported had to have an internal market, or they were considered "dumped" into the market at artificially low prices. Tariffs were imposed for dumping. Today, electronic products, such as alarm clocks, which are made in Asia, are dumped into the American market. The electrical systems in Asia are incompatible with the 110v 60hz system in the US. ..."
"... Cars produced in Japan include models for export that would not fit on the roads in Japan. The list of these types of productions is endless. De-regulation has produced 20th and 21st century sweatshops in areas like call-centres, which are fast becoming off-shored. ..."
"... The narrative says competition is good, and higher production means lower cost to the consumer. That only works when the competition is on a level playing field, and I'm employed to be able to buy what is on offer. As for consumer products, how many TVs or refrigerators do I really need? Korea has the capacity to supply all of the world's automobiles. Over supply is rampant. ..."
Jun 05, 2018 | www.unz.com

Polish Perspective

Decent article, but a few quibbles.

Italy's primary problem is not the euro per se. It isn't even the much talked about "proliferagacy". Italy has in fact run a primary surplus for most of the last 20 years (primary surplus is the government budgetary balance sans interest payments). Italy's main problem is the disastrous lack of productivity.

Its per capita productivity growth has actually declined by 0.1% the last 20 years, versus around 0.7% positive growth for Germany and 0.6% for France. What explains this? Supply side factors. Italy has many large-scale firms which are world-class. This leads a naïve observer to conclude that the problem lies elsewhere.

Scratch the surface a little bit, and you'll find that the main problem for Italy is in the SME sector. The comparison with the German Mittelstand is relevant here. Though many German firms are still family-owned, they nevertheless have a significant amount of meritocracy. Family scions frequently take on more ceremonial roles if they can find a competent outsider to run large parts of the company. By contrast, Italian SMEs are much more nepotistic. Italy also has far less labour mobility, meaning that the potential pool of labour that a local company can draw from is quite limited.

There is therefore no easy solution. Devaluation is not a panacea. Italy is running a current account surplus already. Their problem is lack of growth, which in turn is rooted in supply-side factors.

There's a good paper by Luigi Zingales of University of Chicago (himself an Italian) as you can surmise. He writes a lot of what I've outlined in greater detail if anyone is interested in diving deeper:

https://research.chicagobooth.edu/-/media/research/stigler/pdfs/workingpapers/14diagnosingtheitaliandisease.pdf?la=en&hash=FB3054008103B1E0E24E3F7E1D307523B0B2AD5F

The Bank of Italy has also weighed in:

https://www.bancaditalia.it/pubblicazioni/qef/2018-0422/index.html?com.dotmarketing.htmlpage.language=1

The take-away is that there is no simple solution, Italy's problems are deep, structural and tied to their social organisation. Devaluation, while tempting, would not fix these issues and given that Italy is already running a current account surplus, it is hard to make the case for one. Their exports is already competitive. Their debt problem stems from lack of growth, not persistent budget deficits (mostly running a primary surplus for past few decades).


nickels , June 5, 2018 at 8:16 pm GMT

This analysis sounds like a total crock.

From what other authors say, and what seems far more reasonable, demand has collapsed because the corporate locust is doing the same thing they are doing in America, namely destroying the entire industrial base and leaving a wasteland of debt and unemployment. Add to that an inability to have a monetary policy and it's game over:

Luca Cordero di Montezemolo, a former chairman of Ferrari, Fiat and Alitalia, and now a public enemy because of his dismissal of the "Made in Italy" label, acquired both companies and moved them to Turkey, choosing profit over quality -- and Italian jobs. Montezemolo, of aristocratic background, is a champion of Italian neoliberalism, having founded the influential "free market" think tank Italia Futura (Future Italy) in 2009.

https://www.strategic-culture.org/news/2018/05/30/this-new-italy.html

nickels , June 5, 2018 at 8:31 pm GMT
@nickels
дулебг , June 5, 2018 at 9:40 pm GMT
"Capital osmosis" is well known fact in economic science, and it means that, inside one limited area, profit always runs from the "lower capitally equipped" sides to higher ones. That is the reason why countries always take the money from rich sides and give it to poorer ones. The truth isn't that poor part of nation works less, or that is stupid or unorganized; no, the truth is in that "osmosis".
Beckow , June 5, 2018 at 2:02 pm GMT • 300 Words

@Polish Perspective

Their (Italy's) problem is lack of growth, which in turn is rooted in supply-side factors

That is a fallacy that lies at the heart of the current European crisis. (I agree with the other things you wrote.). It is not the 'supply', but lacking demand that is constraining growth. All supply and higher productivity solutions are based on more 'flexible' labor, removal of barriers, including borders, more 'competition' in everything. That translates in practise into working more for less.

It had worked initially in the 70′s to 90′s when the entrenched inefficiency was the main issue. It hasn't worked in the last 10-15 years. Suggesting more 'supply and higher productivity' reforms simply means doubling down on policies that are failing. What is needed is a huge shift in the labor markets toward more demand for workers so they can improve their work lives, raise incomes, create more economic security.

What Europe (and West in general) need is a very tight labor market. By all means, cut and simplify taxes, abandon austerity, promote some inflation, but the main reform that is needed is to restrict outside labor migration and simultaneously restrict outflow of work. That is explicitly anti neo-liberalism, it is also at the heart of the populist appeal.

Left has completely lost its way with its inability to distinguish between its local voters and the feel-good charity towards the rest of the world. They are in effect being used by the most anti-left business interests to keep labor as cheap as possible. Power to negotiate doesn't come from institutions – it comes from having a strong hand in the labor demand-supply equation.

Given the left collapse, the future is with the nationalist political forces. Trump understands it, so does Salvini, La Pen, Orban, The names might change, but unless democracy is completely abolished the 'selfish', restrict cheap labor politicians will eventually prevail.

Curmudgeon , June 5, 2018 at 4:20 pm GMT

@Beckow

It seems to me that the issue boils down to this:
- Capitalism seeks to concentrate capital and maximize profits;
- Communism seeks to concentrate capital, albeit in a different form than capitalism and minimize profits.
- Efficiency means low cost and/or poorly made, and competition is no longer local, its global.
- Free trade has replace fair trade.

The economic system in place today is not sustainable. In the not so distant past, products exported had to have an internal market, or they were considered "dumped" into the market at artificially low prices. Tariffs were imposed for dumping. Today, electronic products, such as alarm clocks, which are made in Asia, are dumped into the American market. The electrical systems in Asia are incompatible with the 110v 60hz system in the US.

Ice hockey equipment is made in that global ice hockey powerhouse, Mauritius, as are winter parkas and mitts. Cars produced in Japan include models for export that would not fit on the roads in Japan. The list of these types of productions is endless. De-regulation has produced 20th and 21st century sweatshops in areas like call-centres, which are fast becoming off-shored.

Local and national producers have been eliminated due to ending import duties to protect internal companies. The set up has shifted taxation on imported goods to income taxes and business taxes.

The narrative says competition is good, and higher production means lower cost to the consumer. That only works when the competition is on a level playing field, and I'm employed to be able to buy what is on offer. As for consumer products, how many TVs or refrigerators do I really need? Korea has the capacity to supply all of the world's automobiles. Over supply is rampant.

So, who really benefits? Those who seek to concentrate the wealth, and have the capability to transfer out of the country, the value of a smaller (economic) country's GDP, with the push of a button. When it all collapses they'll be off on their private islands or hiding in their bastions.

On another note, yes, Italy is occupied, but so is Germany. The current German government, according to a 1956 Constitutional Court ruling is not the legitimate government of Germany. The "Old" Reich i.e. Wiemar Republic is. Therefore, it is an occupation government of the Allies.

As if we didn't understand that.

TG , June 5, 2018 at 12:13 pm GMT

It was only after the borders had been closed, after the shock of the Wall Street crash in 1929 (no, NOT 1924), and there was an immigration time-out, that America developed its prosperous middle class. Which hurt profits for the rich, which is why it is being rolled back

[Jun 05, 2018] Italy The Center Cannot Hold, by Diana Johnstone

Jun 05, 2018 | www.unz.com

The mystique of the European Union is anti-nationalism, based on the theory that "nations" are bad because they caused the devastating wars of the twentieth century, while European unification is the sole guarantee of "peace". Convinced of their mission, the Eurocentrists have had no qualms in throwing out the baby of democratic choice along with the nationalist bathwater.

The notion that "peace" depends on "Europe" persists despite the NATO bombing of Serbia and European participation in U.S. wars in Afghanistan, Iraq, Libya and Syria, not to mention EU participation in the current major military buildup in the Baltic States against "the Russian enemy". Indeed, thanks to NATO, the EU is gearing for a war even worse than the previous ones.

Since the "nation-state" is blamed for evil in the world, the Eurocentrists react with horror at growing demands in Member States for a return to "national sovereignty". This, however, is a natural reaction to the economic and social disasters resulting from policies dictated by EU institutions in Brussels. The 1992 Maastricht Treaty legally bound member countries to centralized neoliberal monetarist policies; not only "socialism" became illegal – even Keynesianism was ruled out. Promised endless peace and prosperity, citizens of European countries were cajoled into giving up their sovereignty to EU institutions, and many now want it back.

Disillusioned Italy

Italian disillusion is particularly significant. Italy was an exceptionally enthusiastic founding member of the unification begun with the 1957 Treaty of Rome. And yet, Italy's own history illustrates what can go wrong with such unification, since the 19 th century political creation of a unified Italy centered in Turin led to the enrichment of the industrial north at the expense of southern Italy, where the splendor of Naples declined into chronic poverty, crime and corruption. Now Italy is "the south", in the periphery of a European Union centered around Germany.

Antagonism between North and South Italy has given way to a much stronger antagonism between Italy and Germany – each blaming the other for the crisis.

It is only fair to recall that Germans were very attached to their Deutsche Mark and to their own austere financial policies. Germany could only be lured into the common currency by agreeing to let the euro follow German rules. France eagerly supported this concession based on the notion that the common currency would unify Europe. It is doing quite the opposite.

Germany is a major exporting nation. Its trade with the rest of the EU is secondary. It uses the EU as its hinterland as it competes and trades on the global scale with China, the United States and the rest of the world. The proceeds of Germany's favorable EU trade balance is less and less invested in those countries but in Germany itself or outside the EU. In the official German view, the main function of the Southern EU members is to pay back their debts to Germany.

Meanwhile, Italy's once flourishing industrial network has lost its competitive edge due to the euro. It cannot save its exports by devaluation, as it was accustomed to doing. Italy's debt is now 132% of its GNP, whereas the Maastricht Treaty governing the monetary union puts a ceiling of 60% on national debt. And to continue paying the debt, public services are cut back, the middle class is impoverished, the domestic market declines and the economy gets even weaker.

This is precisely the situation that has plunged Greece into ever deepening poverty.

But Italy is not Greece. Greece is a small peripheral country, which can be pounded to death by creditors as a warning of what can happen to others. Italy, on the contrary, is too big to fail. Its collapse could bring the whole EU crashing down.

Italy's Potential Strength Through Weakness

The traditional Italian parties had no solution beyond those that have ruined Greece: cut back social spending, impoverish workers and pensioners, and pay back the foreign banks, with interest.

The odd coalition of the League and the M5S was obliged to try something different: basically, to invest in the economy rather than abandon it to its creditors. Their program combines lower taxes with Keynesian stimulation of investment. Since the leader of the League, Matteo Salvini, and Luigi Di Maio of M5S do not like each other, they selected law professor Giuseppe Conte to be Prime Minister in their coalition cabinet. The interesting choice was that of Paolo Savona for the key post of Minister of Economy and Finance. Savona, whose long career has taken him across the summits of Italian and international finance, was certainly the most qualified choice imaginable. Savona knows everything there is to know about the Italian economy and international currency creation.

And yet, it was the appointment of this 81-year-old expert that created outrage in the Eurocenter.

The uproar was spurred by the fact that in one of his books Savona had described the euro as "a German prison". Savona had also said it was necessary to prepare a Plan B, to leave the euro if there is no other choice. "The alternative is to end up like Greece."

This hint of disloyalty to the euro was totally unacceptable to the European establishment.

The Center struck back in the person of the largely figurehead President of Italy, Sergio Mattarella, who used, or misused, his unique constitutional power by refusing to approve the government. On May 28, he designated as Prime Minister Carlo Cottarelli of the International Monetary Fund – a man who represented everything the Italians had just voted against. Known in Italy as "Mr. Scissors" for his advocacy of drastic government spending cuts, Cottarelli was supposed to run an apolitical "technical" government until new elections could be held in the fall.

This coup against the Italian voters caused momentary rejoicing in the Authoritarian Center. The European Budget Commissioner (a German of course), Günther Oettinger, was reported to be gloating over the prospect that "the markets" (meaning the financial markets) would soon teach Italians how to vote. Italy's economy "could be so drastically impacted", he said, as to send a signal to voters "not to vote for populists on the right and left."

This simply intensified Italian indignation against "German arrogance".

Meanwhile Savona wrote a letter to President Mattarella which introduced a bit of cold reason into an increasingly hysterical situation. He reminded the president that an important meeting of EU heads of state was to be held at the end of June; without a political government, Italy would be absent from negotiations which could seal the fate of the EU. Italy's plea for economic change could expect French support. Savona denied having called for leaving the euro; in the spirit of game strategy, he had mentioned the need for Plan B in order to strengthen one's position before negotiations. He made it clear that his strategy was not to leave the euro but to transform it into a genuine rival to the dollar.

"Germany prevents the euro from becoming 'an essential part of foreign policy', as the dollar is for the United States", wrote Savona. But change becomes necessary, as the dollar is less and less suitable for its role as world currency.

Indeed, the Italian crisis merges with a mounting trans-Atlantic crisis, the U.S. uses sanctions as a weapon in competition with its European "partners". The paradox is that Italy could use its very weakness to oblige Germany to reconsider its monetary policy in a moment when the German economy is also facing problems due to U.S. sanctions on deals with Russia and Iran, as well as protectionist measures. Savona's message was that clever diplomacy could work to Italy's advantage. In its own interest, Germany may need to accept transformation of the euro into a more proactive currency, able to defend European economies from U.S. manipulation.

It was a matter of hours before Cottarella stepped back and a new M5S-League government was formed, with Savona himself back as Minister of Relations with the European Union.

Italy's Double Jeopardy

The new Italian cabinet sworn in on June first is riven with contradictions. Despite all the released anti-EU sentiment, it is definitely not an "anti-EU" government. Conte is back as Prime Minister. The new foreign minister, Enzo Moavero Milnesi, is a staunch pro-European. As Interior Minister, the northern Italy chauvinist Salvini – who doesn't even care particularly for Southern Italians – will get tough with migrants. As Minister of Economic Development, Di Maio will try to find ways improve conditions in the southern regions that elected him. Since Salvini is the more experienced of the two, the League is likely to profit from the experiment more than the M5S.

Some Italians warn that by leaving the "German prison" Italy would simply find itself even more dependent on the United States.

One should never forget that ever since the end of World War II, Italy is an occupied country, with dozens of U.S. military bases on its territory, including air bases with nuclear weapons poised to strike the Middle East, Africa or even Russia. The Italian Constitution outlaws participation in aggressive war, and yet Italian bases are freely used by the United States to bomb whichever country it pleases, regardless of how Italians feel about it. Worst of all, the U.S. used its Italian "NATO bases" to destroy Libya, a disaster for Italy which thereby lost a valuable trade partner and found itself inundated with African refugees and migrants. While international financial experts exhort Italy to cut government expenses, the country is obliged by NATO to spend around 13 billion euros to buy 90 U.S. F-35 fighters and to increase its military spending to around 100 million euros per day.

Italy's economic prospects have been badly hit by U.S.-enforced sanctions against trade with Russia and Iran, important potential energy sources.

U.S. economic aggression, in particular Trump's rejection of the Iranian nuclear deal, is the issue with the potential to bring European leaders together at a time when they were drifting apart. But at present, the Europeans are unable to defy U.S. sanctions in punishment for trade with those countries because their international dealings are in dollars. This has already led to U.S. exacting billions of dollars in fines from the biggest French and German banks, the BNP and Deutsche Bank, for trading that was perfectly legal under their own laws. The French petroleum giant has been obliged to abandon contracts with Iran because 90% of its trade is in dollars, and thus vulnerable to U.S. sanctions. And that is why the idea is growing of building financial instruments around the euro that can protect European companies from U.S. retaliation. [2] See Wolfgang Münchau, "The euro must be made more robust to rival the dollar; US sanctions expose the mistakes made by the founders of the single currency", The Financial Times, 27 May, 2018. https://www.ft.com/content/ca8c6826-5f76-11e8-ad91-e...56df68

The Disappearance of the Left

The disappearance of left political forces has been almost total in Italy. There are many reasons for this, but a curable part of the problem has been the inability of what remains of the left to face up to the two main current issues: Europe and immigration.

The left has so thoroughly transformed its traditional internationalism into Europism that it has been unable to recognize EU institutions and regulations as a major source of its problems. The stigmatization of "the nation" as aggressively nationalistic has held back left ability to envisage and advocate progressive policies at the national level, instead putting its hopes forever in a future hypothetical "social Europe". Such a transformation would require unanimity under EU rules – politically impossible with 28 widely differing Member States.

Without such inhibitions, the far right capitalizes on growing discontent.

Another related handicap of the left is its inability to recognize that mass immigration is indeed "a problem" – especially in a country like Italy, with a flagging economy and 20% official unemployment (although this figure is probably too high, considering undeclared labor). There is resentment that prosperous Germany issued a general invitation to refugees, which for geographic reasons pile in Mediterranean countries unable to cope. The mass influx of economic migrants from Africa is not even "taking jobs away from" Italians – the jobs are not there to take. These migrants fled war and misery to come to Europe in order to earn money to send back to their families, but how can they meet possibly meet these expectations?

It is all very well to extol the glorious hospitality of America entreating the world to " Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me ". Such generosity was suited to a new nation with huge empty spaces and rapidly growing industry in need of a work force. The situation of a "full" nation in a time of economic downturn is quite different. What is to become of the tens of thousands of vigorous young men arriving on Italian shores where there is nothing for them to do except sell African trinkets on the sidewalks of tourist centers? To make matters worse, the great contemporary thrust of technical innovation aims at replacing more and more workers with robots. Leftist denial of the problem leaves its exploitation and resolution to the extreme right.

Some leftist politicians in Italy, such as Stefano Fassina of the Sinistra Italiana are waking up to this need. A left that dogmatically ignores the real concerns of the people is doomed. A bold, honest, imaginative left is needed to champion Italians' independence from both German-imposed austerity and the expensive military adventurism demanded by the United States. But the interlaced problems created by unregulated globalization do not lend themselves to easy solutions.

Notes

[1] David Adler, "Centrists Are the Most Hostile to Democracy, Not Extremists", The New York Times, May 23, 2018.

[2] See Wolfgang Münchau, "The euro must be made more robust to rival the dollar; US sanctions expose the mistakes made by the founders of the single currency", The Financial Times, 27 May, 2018. https://www.ft.com/content/ca8c6826-5f76-11e8-ad91-e01af256df68


Polish Perspective , June 4, 2018 at 12:47 pm GMT

Decent article, but a few quibbles.

Italy's primary problem is not the euro per se. It isn't even the much talked about "proliferagacy". Italy has in fact run a primary surplus for most of the last 20 years (primary surplus is the government budgetary balance sans interest payments). Italy's main problem is the disastrous lack of productivity.

Its per capita productivity growth has actually declined by 0.1% the last 20 years, versus around 0.7% positive growth for Germany and 0.6% for France. What explains this? Supply side factors. Italy has many large-scale firms which are world-class. This leads a naïve observer to conclude that the problem lies elsewhere.

Scratch the surface a little bit, and you'll find that the main problem for Italy is in the SME sector. The comparison with the German Mittelstand is relevant here. Though many German firms are still family-owned, they nevertheless have a significant amount of meritocracy. Family scions frequently take on more ceremonial roles if they can find a competent outsider to run large parts of the company. By contrast, Italian SMEs are much more nepotistic. Italy also has far less labour mobility, meaning that the potential pool of labour that a local company can draw from is quite limited.

There is therefore no easy solution. Devaluation is not a panacea. Italy is running a current account surplus already. Their problem is lack of growth, which in turn is rooted in supply-side factors.

There's a good paper by Luigi Zingales of University of Chicago (himself an Italian) as you can surmise. He writes a lot of what I've outlined in greater detail if anyone is interested in diving deeper:

https://research.chicagobooth.edu/-/media/research/stigler/pdfs/workingpapers/14diagnosingtheitaliandisease.pdf?la=en&hash=FB3054008103B1E0E24E3F7E1D307523B0B2AD5F

The Bank of Italy has also weighed in:

https://www.bancaditalia.it/pubblicazioni/qef/2018-0422/index.html?com.dotmarketing.htmlpage.language=1

The take-away is that there is no simple solution, Italy's problems are deep, structural and tied to their social organisation. Devaluation, while tempting, would not fix these issues and given that Italy is already running a current account surplus, it is hard to make the case for one. Their exports is already competitive. Their debt problem stems from lack of growth, not persistent budget deficits (mostly running a primary surplus for past few decades).

Polish Perspective , June 4, 2018 at 3:21 pm GMT
@Polish Perspective

Just to illustrate the point about the myth of 'profligate' Italy.

The problem is lack of growth, not lack of fiscal discpline. And the lack of growth is rooted in deeply entrenched supply-side structural patterns, which changing the currency (or letting it devalue) will do nothing to fix.

jilles dykstra , June 5, 2018 at 7:30 am GMT
The interesting thing is that it is in Italy the same as in France, both what is called extreme left, Mélenchon, and extreme right, Marine le Pen, are against the EU.
In the first round of the presidential elections Mélenchon and Le Pen together got 40% of the votes.
In Italy now what is called extreme left and extreme right together formed a government.
Brussels fears for the euro.
They're quite right, the southern European countries, including France, have a long histories of solving economic problems by devaluation, made impossible by the euro.
As the retired German sociologist Seeckt, retired men can speak their minds, says 'the big mistake of the EU was (and is, my opinion) that the northern EU countries said to the southern "become like us" '.
Cultures change very slowly, in France traces of the Louis XIV reign can still be found, a love of bureaucracy.
jilles dykstra , June 5, 2018 at 7:32 am GMT
@Polish Perspective

In about 1973 an Italian consultant said to me 'there is only one way to solve our problems, sell our civil servants for what they cost, and buy them back for what they're worth'.

renfro , June 5, 2018 at 7:49 am GMT

World Values Survey results indicate that in Europe and the United States, people who describe themselves as "centrist" on the average have less attachment to democracy (e.g. free and fair elections) that those on the left, and even those on the far right

I find this article sort of weird. And the above statement is based on this -- ->David Adler, "Centrists Are the Most Hostile to Democracy, Not Extremists", The New York Times, May 23, 2018
Which is based on this -- -> http://www.worldvaluessurvey.org/WVSDocumentationWV6.jsp

And theses questions: ..which are totally sloppy. For instance question V138. 'People obey their rulers. 1 2 3 4 5 6 7 8 9 10.' is a ridiculous kindergarten question. A 'serious' question on the value of democracy would have been "People obey the (rule of) law", not 'rulers'. Sorry, this is junk in which evidently those who didnt go for 1 or 2 or 9 or 10 were categorized as centrist and you and Adler somehow interpreted that as the problem.
Then you proceed to say .."Leftist denial of the problem leaves its exploitation and resolution to the extreme right.'
And that .'A bold, honest, imaginative left is needed to champion Italians' independence from both German-imposed austerity and the expensive military adventurism demanded by the United States. '

So what is your point? .That 'centrist' should move to the left to solve your problems?

The survey questions:

[MORE]

"I'm going to describe various types of political systems and ask what you think about each as a way of
governing this country. For each one, would you say it is a very good, fairly good, fairly bad or very bad
way of governing this country? (Read out and code one answer for each):
Very
good
Fairly
good
Fairly
bad
Very bad
V127. Having a strong leader who does not have to bother with parliament and elections
1
2
3
4
V128. Having experts, not government, make decisions
according to what they think is best for the country
1
2
3
4
V129. Having the army rule
1
2
3
4
V130. Having a democratic political system
1
2
3
4
(Show Card T)
Many things are desirable, but not all of them are essential characteristics of democracy. Please tell me for
each of the following things how essential you think it is as a characteristic of democracy. Use this scale
where 1 means "not at all an essential characteristic of democracy" and 10 means it definitely is "an
essential characteristic of democracy" (read out and code one answer for each):
Not an essential An essential
characteristic characteristic
of democracy of democracy
V131. Governments tax the rich and subsidize the poor. 1 2 3 4 5 6 7 8 9 10
V132. Religious authorities ultimately interpret the laws. 1 2 3 4 5 6 7 8 9 10
V133. People choose their leaders in free elections. 1 2 3 4 5 6 7 8 9 10
V134. People receive state aid for unemployment. 1 2 3 4 5 6 7 8 9 10
V135. The army takes over when government is incompetent. 1 2 3 4 5 6 7 8 9 10
V136. Civil rights protect people from state oppression. 1 2 3 4 5 6 7 8 9 10
V137. The state makes people's incomes equal. 1 2 3 4 5 6 7 8 9 10
V138. People obey their rulers. 1 2 3 4 5 6 7 8 9 10
V139 Women have the same rights as men.

Bartolo , June 5, 2018 at 9:00 am GMT
Good analysis of the reasons the left has declined. I do not see them changing course, but rather doubling down. In Spain, Podemos wants to have universal basic income (or something close to it) AND open borders
Seamus Padraig , June 5, 2018 at 9:05 am GMT

For a generation, acceptance of the neoliberal doctrine "there is no alternative" has paralyzed politics in the West. If there is no alternative, what is politics to be about?

What is politics to be about? Why, tranny bathrooms, of course!

Echoes of History , June 5, 2018 at 9:38 am GMT
My blood runs cold,
My nation has just been sold,
Thus the center cannot hold,
Thus the centrists must fold.
j2 , June 5, 2018 at 11:43 am GMT
Not being any kind of an economist and in general mistrusting economy as a wannabe science, I would just take a compass, find the economic center point of EU and draw a circle. Whatever is far from the center will face problems because in unification the center develops faster than the outskirts. The traditional solution to this dilemma is to have borders (no unification) since borders create a micro-economy that can function in its limits (better than outskirts of an unified economy) just like animal species can survive if there are natural barriers but removing them many species die out. Another alternative is to pack your bags and move closer to the center.
TG , June 5, 2018 at 12:13 pm GMT
I agree with much of this. But a quibble when you say that the EU was created out of a desire to remove the evil of nationalism and create peace. That's the lipstick on the pig. The EU was and is entirely devoted to boosting the profits of the super-rich, and putting big finance in charge. The push against nationalism has nothing to do with peace, and only because nationalism will tend to fight against the strip-mining of a society for profit. And massive immigration was never a moral issue, neither today nor in the America of a century ago. It was all about cheap labor and the massive profits that flow therefrom. Even with all those resources, mass immigration in the United States at the end of the 19th and beginning of the 20th centuries, created crushing poverty and a massive spike in crime. It was only after the borders had been closed, after the shock of the Wall Street crash in 1929 (no, NOT 1924), and there was an immigration time-out, that America developed its prosperous middle class. Which hurt profits for the rich, which is why it is being rolled back
gsjackson , June 5, 2018 at 12:16 pm GMT
@Seamus Padraig

LOL. Yes, there's a wedge issue a thinking man can sink his teeth into.

SCOTUS just reignited another one by surprisingly getting a case right, 7-2, in finding for religious liberty and the baker who didn't want to do a wedding cake for poofters. I seem to recall Tucker Carlson feeling the wrath and fury of all MSM for daring to suggest that the baker had a legitimate constitutional issue.

Breyer and Kagan voted with the Republican/goy majority. Kagan, of course, regularly gets offered up as the embodiment of in-your-face liberal-feminist-Jewish rule, but the couple of opinions I've read by her suggested a pretty good legal mind, possibly tempered by some common sense.

In any case, yes, identity politics provide the MSM with all the wedge issue substance needed for the American public discourse. Europe, however, may have some remaining expectations of adult content.

Glaivester , Website June 5, 2018 at 12:37 pm GMT
@Polish Perspective

SME sector? Please explain abbreviation.

Dagon Shield , June 5, 2018 at 12:55 pm GMT
It's pasta fagioli from now on
Liberty Mike , June 5, 2018 at 1:03 pm GMT
@Echoes of History

Son, I don't mean to be a scold,
But, you have been done told,
If you really want the gold,
Fortune favors the bold.

Chase , June 5, 2018 at 1:10 pm GMT
@Polish Perspective

These "problems" are 100% within the context of the neoliberal consensus. The idea that we have to have 2-3% annual growth – forever – or the world will somehow be devastatingly awful is not a very sound foundation for a Good life.

Catiline , June 5, 2018 at 1:20 pm GMT
@Polish Perspective

That fiscal discipline you speak of is a significant factor in Italy's lack of growth. Furthermore, it was designed and implemented for precisely that reason.

Beckow , June 5, 2018 at 2:02 pm GMT
@Polish Perspective

Their (Italy's) problem is lack of growth, which in turn is rooted in supply-side factors

That is a fallacy that lies at the heart of the current European crisis. (I agree with the other things you wrote.). It is not the 'supply', but lacking demand that is constraining growth. All supply and higher productivity solutions are based on more 'flexible' labor, removal of barriers, including borders, more 'competition' in everything. That translates in practise into working more for less .

It had worked initially in the 70′s to 90′s when the entrenched inefficiency was the main issue. It hasn't worked in the last 10-15 years. Suggesting more 'supply and higher productivity' reforms simply means doubling down on policies that are failing. What is needed is a huge shift in the labor markets toward more demand for workers so they can improve their work lives, raise incomes, create more economic security. What Europe (and West in general) need is a very tight labor market. By all means, cut and simplify taxes, abandon austerity, promote some inflation, but the main reform that is needed is to restrict outside labor migration and simultaneously restrict outflow of work. That is explicitly anti neo-liberalism, it is also at the heart of the populist appeal.

Left has completely lost its way with its inability to distinguish between its local voters and the feel-good charity towards the rest of the world. They are in effect being used by the most anti-left business interests to keep labor as cheap as possible. Power to negotiate doesn't come from institutions – it comes from having a strong hand in the labor demand-supply equation.

Given the left collapse, the future is with the nationalist political forces. Trump understands it, so does Salvini, La Pen, Orban, The names might change, but unless democracy is completely abolished the 'selfish', restrict cheap labor politicians will eventually prevail.

Wizard of Oz , June 5, 2018 at 2:30 pm GMT
@Catiline

Please help me understand the implications of your comment.

Are you implying support for government debt fuelled expenditures as in Greece before the GFC – or Argentina time and again?

Are you really saying the EU's (?EZ's) fiscal discipline rules were designed so that Italy (and maybe some and what other country?) would have lower growth in economic activity? If so why? And designed and intended by what persons?

Anon [370] Disclaimer , June 5, 2018 at 2:34 pm GMT
@Glaivester

It's very commonplace. You should have been able to find it with a search which took less time than you comment/reply.

gwynedd1 , June 5, 2018 at 2:52 pm GMT
@Catiline

Lot of people still think Keynes is wrong because its used as an excuse to tax and spend. He wasn't wrong about the fact that fiance matters. Neither was Kalecki and neither was Irving Fischer wrong that fiance matters after figuring out his disastrous mistake. Even Thomas Mun understood money needs to circulate. Seems like Europe thinks the idea's of the Spanish empire are best. Hoard coin.

Curmudgeon , June 5, 2018 at 4:20 pm GMT
@Beckow

It seems to me that the issue boils down to this:
- Capitalism seeks to concentrate capital and maximize profits;
- Communism seeks to concentrate capital, albeit in a different form than capitalism and minimize profits.
- Efficiency means low cost and/or poorly made, and competition is no longer local, its global.
- Free trade has replace fair trade.

The economic system in place today is not sustainable. In the not so distant past, products exported had to have an internal market, or they were considered "dumped" into the market at artificially low prices. tariffs were imposed for dumping. Today, electronic products, such as alarm clocks, which are made in Asia, are dumped into the American market. The electrical systems in Asia are incompatible with the 110v 60hz system in the US.
Ice hockey equipment is made in that global ice hockey powerhouse, Mauritius, as are winter parkas and mitts. Cars produced in Japan include models for export that would not fit on the roads in Japan. The list of these types of productions is endless. De-regulation has produced 20th and 21st century sweatshops in areas like call-centres, which are fast becoming off-shored.

Local and national producers have been eliminated due to ending import duties to protect internal companies. The set up has shifted taxation on imported goods to income taxes and business taxes.
The narrative says competition is good, and higher production means lower cost to the consumer. That only works when the competition is on a level playing field, and I'm employed to be able to buy what is on offer. As for consumer products, how many TVs or refrigerators do I really need? Korea has the capacity to supply all of the world's automobiles. Over supply is rampant.

So, who really benefits? Those who seek to concentrate the wealth, and have the capability to transfer out of the country, the value of a smaller (economic) country's GDP, with the push of a button. When it all collapses they'll be off on their private islands or hiding in their bastions.

On another note, yes, Italy is occupied, but so is Germany. The current German government, according to a 1956 Constitutional Court ruling is not the legitimate government of Germany. The "Old" Reich i.e. Wiemar Republic is. Therefore, it is an occupation government of the Allies.
As if we didn't understand that.

Z-man , June 5, 2018 at 5:08 pm GMT
A lot of bad assumptions and conclusions in this article.
Matteo Salvini has been supported by the southerners as well as the northerners because he is defending Italy and Italians from the Globalists and their hordes invading Italy and DiMaio and the MS5 agree with him and gave him the Interior ministry to handle it. But he still gets a lot of resistance from the controlled globalist press. Go Salvini!
Dieter Kief , June 5, 2018 at 5:41 pm GMT
@Polish Perspective

The problem is lack of growth

Definitely so.

And the problem is, that Italy lacks competitiveness on a global scale. It's a puppet-home perspective (and zero-sum-reasoning) to argue, that German exports are the reason, that Italin exports declined. – Look at delivery cars, for example. something now even Italian customers by more and more in Asia (once, this was a quasi monopoly, because it was just something everybody did, to buy Italian Vans. – Even that is eroding now. And look at -look at what you want in Italy consumer products, industrial products,

Meanwhile, Italy's once flourishing industrial network has lost its competitive edge due to the euro.

So – this is a complete hoax, in the end. Especially since Italy is drowned in cheap money – except that most of it is not invested, nowadays, but used to pay – for the pensions, for social security, for univeristies the Police

Meanwhile in rome: The local authorities tell the public, that there are "missing busses" at RomaTransporti or however th correct name of thsi fabulous enterprise is. Story is true though: There are at least dozens 8some say:Hundreds!) of buses, which exist only in the paperwork

Ozymandias , June 5, 2018 at 5:57 pm GMT
@Chase

"The idea that we have to have 2-3% annual growth – forever – or the world will somehow be devastatingly awful is not a very sound foundation for a Good life."

Growth in GDP per capita is sustainable provided excess population is disposed of, which, historically, it always has been via conflict. A world without war and the sanctity of human life are the ideas in opposition here.

WorkingClass , June 5, 2018 at 6:41 pm GMT
Centrist is a focus group tested term used to hide what a Centrist actually is. Neither Center Right nor Center Left has ANY ideology. A Centrist seeks/holds office to receive money from rent seekers. Nothing else.
peterAUS , June 5, 2018 at 7:17 pm GMT
Bottom line, IMHO:
A good idea (EU) failed because power corrupts.
A bad idea (nationalism) is coming up. Won't be pretty, especially there.
As

Growth in GDP per capita is sustainable provided excess population is disposed of, which, historically, it always has been via conflict. A world without war and the sanctity of human life are the ideas in opposition here.

Nobody is willing, apparently, to address the real issue:
Automation, overproduction, mass of people not needed as workers/employers anymore.
The nature of (modern/future) work, DISTRIBUTION of produced good and services, organization of such society, etc.

Nationalism is regression into known.

We need a change of a full paradigm. Pass too hard.

Looking at the mix of "people" and "leaders" I go for a decent bloodshed as the most likely option, hopefully not within next 10 years.
Hopefully.

obwandiyag , June 5, 2018 at 7:31 pm GMT
More than half of Italy's economy is underground. Thus your "statistics" are groundless.
nickels , June 5, 2018 at 8:16 pm GMT
@Polish Perspective

This analysis sounds like a total crock.

From what other authors say, and what seems far more reasonable, demand has collapsed because the corporate locust is doing the same thing they are doing in America, namely destroying the entire industrial base and leaving a wasteland of debt and unemployment. Add to that an inability to have a monetary policy and it's game over:

Luca Cordero di Montezemolo, a former chairman of Ferrari, Fiat and Alitalia, and now a public enemy because of his dismissal of the "Made in Italy" label, acquired both companies and moved them to Turkey, choosing profit over quality -- and Italian jobs. Montezemolo, of aristocratic background, is a champion of Italian neoliberalism, having founded the influential "free market" think tank Italia Futura (Future Italy) in 2009.

https://www.strategic-culture.org/news/2018/05/30/this-new-italy.html

nickels , June 5, 2018 at 8:31 pm GMT
@nickels
дулебг , June 5, 2018 at 9:40 pm GMT
"Capital osmosis" is well known fact in economic science, and it means that, inside one limited area, profit always runs from the "lower capitally equipped" sides to higher ones. That is the reason why countries always take the money from rich sides and give it to poorer ones. The truth isn't that poor part of nation works less, or that is stupid or unorganized; no, the truth is in that "osmosis".

[Jun 05, 2018] Seven signs of the neoliberal apocalypse Van Badham Opinion The Guardian

Jun 05, 2018 | www.theguardian.com

For 40 years, the ideology popularly known as "neoliberalism" has dominated political decision-making in the English-speaking west.

People hate it . Neoliberalism's sale of state assets, offshored jobs, stripped services, poorly-invested infrastructure and armies of the forcibly unemployed have delivered, not promised "efficiency" and "flexibility" to communities, but discomfort and misery. The wealth of a few has now swelled to a level of conspicuousness that must politely be considered vulgar yet the philosophy's entrenched itself so deeply in how governments make decisions and allocate resources that one of its megaphones once declared its triumph "the end of history".

ss="rich-link"> Australia needs tough cop to fight wage theft, Sally McManus says Read more

It wasn't, as even he admitted later . And given some of the events of the contemporary political moment, it's possible to conclude from auguries like smoke rising from a garbage fire and patterns of political blood upon the floor that history may be hastening neoliberalism towards an end that its advocates did not forecast.

Three years ago, I remarked that comedian Russell Brand may have stumbled onto a stirring spirit of the times when his "capitalism sucks" contemplations drew stadium-sized crowds. Beyond Brand – politically and materially – the crowds have only been growing.

Is the political zeitgeist an old spectre up for some new haunting? Or are the times more like a strong angel proclaiming with a loud voice, "the combination of inequality and low wage growth is fuelling discontent. Time to sing a new song."

In days gone past, they used to slice open an animal's belly and study the shape of its spilled entrails to find out. But we could just keep an eye on the news.

Here are my seven signs of the neoliberal apocalypse:

1. Girl crushes on Sally McManus

The first sign appears with the noise of thunder – personalised in the form of ACTU secretary, Sally McManus, and the trade union movement revival. No Australian of my own generation or younger would likely possess any cultural memory of a trade union leader as hero – let alone one whose packed-to-the-rafters appearance at Melbourne's Town Hall last week brought with it chants and pennants, t-shirts and cheers a column of selfie-hunters. "We want to see an end to neoliberalism!" she roared to wild applause in the barnstorming style that's drawing similar crowds across the country. You had to feel sorry for conservative commentator Janet Albrechtsen, who rode in to defend business-as-usual in a column entitled "I have to admit a slight girl-crush on ACTU boss Sally McManus". "She's really not my type," McManus retorted . Burnnnn.

Sally McManus (@sallymcmanus)

She's really not my type. pic.twitter.com/7aA1T6hab5

April 17, 2018
2. Yanis Varoufakis praises the Communist Manifesto

The second bears a great sword – and that's the dashing former finance minister of Greece, Yanis Varoufakis. As a scion of very modern political pedigree, he's an extraordinary (brilliant) choice to pen the new introduction to a re-released Marx and Engels' Communist Manifesto . A revolutionary provocation considered so incendiary it was banned on its 1848 publication, the book only achieved distribution when its entry into court documents as evidence of sedition legally enabled it to be printed again. Varoufakis's praise of it in his introduction is no less provocative; he sees the book as a work of prediction. "We cannot end this idiocy individually," he writes of our present capitalist iteration, "because no market can ever emerge that will provide an antidote to this stupidity. Collective, democratic political action is our only chance for freedom and enjoyment."

Sign up to receive the latest Australian opinion pieces every weekday

https://www.theguardian.com/email/form/plaintone/4160

3. Paul Keating's rejection

It was a year ago that a third sign first appeared, when the dark horse of Australian prime ministers, Paul Keating, made public an on-balance rejection of neoliberal economics. Although Liberal PM Malcolm Fraser instigated Australia's first neoliberal policies, it was Keating's architecture of privatisation and deregulation as a Labor treasurer and prime minister that's most well remembered. Now, "we have a comatose world economy held together by debt and central bank money," Keating has said, "Liberal economics has run into a dead end and has had no answer to the contemporary malaise." What does the disavowal mean? In terms of his Labor heir Bill Shorten's growing appetite for redistributive taxation and close relationship to the union movement, it means "if Bill Shorten becomes PM, the rule of engagement between labour and capital will be rewritten," according to The Australian this week. Can't wait!

4. Hipsters picket trendy cafe

The fourth sign comes as the death of a certain kind of pale passivity and acceptance of the status quo among the young. But much as Kendall Jenner got the mood so wrong when she tried to retail Pepsi through the form of a mock riot last year, this week the kids in Melbourne got the times very, very right. On Tuesday, a flash mob of young people descended on no less than hipper-than-hip Northcote coffee palace, Barry, demanding the instant redress of alleged unfair dismissal and wage theft from staff pay packets. Not so long ago, it was the Melbourne fashion for young people to sit at cafes and joke about how exploited at work they were. The evolution to shouty pickets and cafe shut downs indicate in a period of record low wage growth, the laughs have worn quite thin.

5. The reds are back under the beds

There's always a bit of judgment and vengeance inherent to the factional shenanigans of Australia's Liberal party, but its refreshed vocabulary warrants inclusion as the fifth sign. Michael Sukkar, the member for Deakin, has been recorded in a dazzling rant declaring war on a "socialist" incursion into a party whose leader is a former merchant banker who pledged to rule for "freedom, the individual and the market" the very day he was anointed. Sukkar's insistence is wonderful complement to the performance art monologues of former Liberal MP Bronwyn Bishop on Sky, where she weekly decries socialism is to blame for everything from alcoholism to energy prices. The reds may not be under the beds quite yet, but if Sukkar's convinced some commie pinkos are already gatecrashing cocktail events with the blue-tie set, they're certainly on his mind.

6. Tony Abbott becomes a fan of nationalising assets

Or maybe's Sukkar's right about the socialists termiting his beloved Liberal party. How else to explain the earthquake-like paradigm shift represented by the sixth sign? Since when do neoliberal conservatives argue for the renationalisation of infrastructure, as is the push of Tony Abbott's gang to nationalise the coal-fired Liddell power station? It may be a cynical stunt to take an unscientific stand against climate action, but seizing the means of production remains seizing the means of production, um, comrade. "You know, nationalising assets is what the Liberal party was founded to stop governments doing," said Turnbull, even as he hid in the dens and in the rocks of the mountains to weather – strange coincidence – yet another Newspoll loss.

ss="rich-link"> Yanis Varoufakis: Marx predicted our present crisis – and points the way out Read more 7. Blue-collar billionaires

In the established canon, the final sign, the seventh, installs new saints on to golden altars before praying supplicants. And I'd suggest some circumspection before the incense is lit and venerations begin. A clear electoral yearning for a sincere leadership of politics beyond the neoliberal frame has encouraged lying populists on the right, like the "blue-collar billionaire" opportunistic falsity of Trump. For a left regaining momentum, there's also danger; seizing at instant, available heroes propels into leadership politicians who are polarising and imperfect for the task.

The pressing need is not to pray for intercession; Varoufakis's call is right – "collective, democratic political action" is the genuine alternative, and it's broader democratic investment in the institutions of parties, movements, academies and media that always builds the world to come. That is, after all, what the neoliberals did. And look – just look – how far they got.

• Van Badham is a Guardian Australia columnist


sierrasierra , 27 Apr 2018 05:50

Neoliberalism so far and it's a rather interesting read if you follow global politics, yes countries like people have ' charts' and Australia's is realtively tame:

http://astrologyforaquarius.com/sky-watch-and-a-global-events-forecast/mars-cycle-january-29-2017-january-2-2019 /

ID2778880 -> DickTyger , 27 Apr 2018 05:48
This is absolutely true. Unintended consequences will always arise if the dim-witted tamper with complex systems they do not understand.

Brexit is a classic case. It has blown up in the faces of its proponents and the rather more level-headed among them are desperately trying to contain the spreading damage.

GraemeHarrison -> Weakaspiss , 27 Apr 2018 05:46
Ably assisted by Rupert's >75% control of print media... with his 'Get Bill' campaigns (first Hayden, later Shorten) with 'Get Juliar' in between! The masses are swayed by big media, enough to deliver the 1-3% needed to gain a parliamentary majority!
uhurhi , 27 Apr 2018 05:43
"new introduction to a re-released Marx and Engels' Communist Manifesto.
Collective, democratic political action is our only chance for freedom and enjoyment."

Might be true. But frightening that people should naively still think that democracy is to be found in the 'Dictatorship of the Proletariate' [ ie those who know what's good for you even if you don't like it ] of the Communist Manefesto after the revelations of what that leads to in the Gulag Arichipeligo , Mao's China , Pol Pot , Kim John - un . How quickly the world forgets. - you might just as well advocate Mein Kampf it's the same thing in the end !

curiouswes -> Jamie Richardson , 27 Apr 2018 05:42
I don't think socialism can work without giving up too much freedom. Once you are in the Leviathan's clutches, it is difficult to break free. In the USA, we have a great system. I call it socialism for the rich and capitalism for the poor. It works great, but it only works great for 1% of the people.
Starwars102 -> Awabakali , 27 Apr 2018 05:40
https://mises.org/wire/real-relationship-between-capitalism-and-environment
This idea of Capitalism fundamentally and completely undermining the environment is a myth. You realise that the worst possible environmental degradation today occurs in extremely poor countries which have neither the economic base, nor the surplus money to care for the environment. Compound this with terrible legal systems in many of those countries and you get the economic degradation you have today.
GraemeHarrison -> Powerspike , 27 Apr 2018 05:36
The fact that multinationals are happy to take Australian minerals from the land, make money selling products to Australians, yet pay nil tax in Australia tells you everything you need to know about how much they care for our 'state and society'.
daily_phil , 27 Apr 2018 05:35
Does present day neo-liberalism actually qualify as a political movement?

Vested interests and the dollar seem to have all the power. Lies and deception are so common the truth is seen as the enemy. The voting public are merely fools for manipulation. Nah, neo-liberalism is not government, it is something far nastier, and clearly not what the public vote for, presuming a vote actually counts for anything anymore.

RedmondM -> charleyb23 , 27 Apr 2018 05:33
And while we are discussing totalitarian thugs how many died at the hands of Hitler, Mussolini, Pinochet, Peron, Marcos and others of the right?

The death toll of just Mao far exceeds the combined death toll of the the others you mentioned.

GraemeHarrison -> vanbadham , 27 Apr 2018 05:33
Plus, unlimited funding for elections has cemented capitalism's ability to 'buy' all the elections, and hold-captive all the regulators it needs. Without the Citizens United decision from right wing SCOTUS judges, US elections would be far more representative. Only in capitalism can one believe that "money equals free speech". No such provision is in the US constitution, so it is only these Bush-appointed judges who have determined that money can rule the people. Even more stupid are the countries that have followed the USA down this slippery slope. If you can fund politicians to undermine the ATO and ASIC, why not also allow corporations to just pay bribes to judges to get decisions they would like?
MuzzaC -> curiouswes , 27 Apr 2018 05:33
Thanks curiouswes. Nice to engage in a polite discussion for a change.

I think you are right, in that all revolutions are susceptible to falling to their own methods. Any mechanism for revolution legitimises the same mechanism for counter-revolution. This is why violent revolution leads to militarism and authoritarianism. I don't think anyone welcoming Lenin at the Finland Station did so because they wanted to live in a police state. By the same token, I don't think that Socialism is inherently linked to giving the state authoritarian power. In fact Socialism and democracy are perfectly compatible, because democracy (one citizen one vote) is the counterweight to capitalism (one dollar one vote).

As for globalism, it's the natural mode of capitalism and has been for centuries. Colonial expansion and capitalism became synonymous with things like the Dutch East India Company. Neoliberalism wants global reach for capital, but not for the regulators. They want keep their tax-haven cake and eat it too. Typically, what they want is less about a free market and more about freedom to game the market.

GraemeHarrison -> Confucion , 27 Apr 2018 05:27

Democracy paralyses

No, the current malaise is not 'due' to democracy, but despite it. America has unlimited political funding by capitalism to sway elections to their desires. Australia is in almost the same position, due to weak political funding reporting, and nil limits on what 'non-party' entities can spend on elections, or in the case of Rudd's removal, how just $45m in advertising by the MCA managed to remove a sitting PM, because the handful of MCA members did not want a resource tax. Our democracy has slipped into being a plutocracy (rule by the wealthy).
Robert Davie , 27 Apr 2018 04:54
Neoliberalism has inflicted a great deal of damage on western economies through the off-shoring of industries and jobs by the wealthy elites who were aided by the donor addicted political class. As a result, western democracies have weakened themselves in the eyes of the world community who now see us as examples of dysfunctional economies and governing methods. Who can blame them when the leading champion of the rules based order is so smitten with debt it must withdraw into itself under the threat of debt default.

The way forward for us is not to look back at what is lost but too look at developing new manufacturing industries and in particular, high technology manufacturing involving vehicles, batteries, solar panels, biotechnology and other related areas.

KCJ1951 , 27 Apr 2018 04:41
What is always revealing about Vanessa and her obsession with neoliberalism, is her intellectual dishonesty wrapped in a smattering of populist half-truths while ignoring any fact that might get in the way of the emotional narrative.
How successful were the largely populist socialist governments in latin America: Argentina, Brazil, Bolivia, Ecuador and, of course, the socialist paradise of Venezuela?
We don't have to go back 40 years Vanessa. A quick peek east across the Pacific to the last decade of failed populist socialist ideology in South America tells enough.
PS: Delighted to see that you are back to full health after the 2 months of "absolute hell" that you went through during the SSM postal survey - Q&A.
Peter Krall , 27 Apr 2018 04:40
Neoliberalism, capitalism even, may well be dying. But the spectre of socialism is dead. What you hear when kicking the cupboard is just the squeaking of the door, not the spectre supposedly rumoring inside.

Worse, socialism did not just disappear but considerable fractions degenerated into all kinds of zombies: you have the aggressive dreamers, who confound anecdotes about repair-cafes or school meals with economic modeling and won't accept any response but flattery (yes, the 'senior' economic commentator is an example). You have the fascists supporting Assad because he administrates the legacy of his Hitler-admiring father and people like the Eichmann-assistant Alois Brunner, and a lot of them identify as 'anti-imperialist left-wingers'. You have the naive nation-state nostalgics who believe the value of work can be increased by blocking immigration, ignoring that the assembly of a car for the German market can be done in the Netherlands or Slovakia just as well as in the UK.

To be sure: I know that persons like Varoufakis (or Badham) are neither fascists nor morons. I wished it were these people who shaped the society after the downfall of laissez-faire capitalism. But I fail to believe it. I believe that the end of laissez-faire capitalism will coincide with the rise of fascism. Thus, I propose to extend capitalism's life expectancy be shifting tax burdens from income and profit to wealth and to create a favorable environment for tech-addicted turbo-capitalism.

[May 03, 2018] A sovereign that HAS NO DEBT IN A FOREIGN CURRENCY has zero risk of insolvency

May 03, 2018 | www.moonofalabama.org

karlof1 | May 2, 2018 5:28:28 PM | 175

WJ @172--

Just when during WW1 the British determined they were going to be backstabbed by their American cousins is unknown to me, but hopefully my unfinished research into that era will provide an answer. Clearly, Keynes knew what would occur as he observed the proceedings at Versailles, which prompted him to go to Marseilles to write Consequences. I greatly disagree with most of Wikipedia's discussion of Consequences except for this bit in the intro:

"In his book, he argued for a much more generous peace, not out of a desire for justice or fairness – these are aspects of the peace that Keynes does not deal with – but for the sake of the economic well-being of all of Europe, including the Allied Powers, which the Treaty of Versailles and its associated treaties would prevent. [My Emphasis]

Thanks to Wilson's stroke, we'll never know how he really felt about the last months of his administration; his wife becoming the first de facto female president of the USA. One of the better indicators about the nascent Deep States's feeling about Versailles is their behavior during the 1920s as it laid the ground work for the Great Depression's onslaught with Dollar Diplomacy and Teapot Dome exemplifying its moral compass. Prohibition's gangsters and coppers provided the required distraction of the masses until the money vanished. Then came radio, the beginnings of mass media and onset of media conglomeration.

paulmeli , May 2, 2018 6:07:44 PM | 176

james @ 166
i think what is missing in your analysis "how governments that print their own currency such as US, UK and China can print as much as they want and use it as they like" is the key acknowledgement that the us$ has been used as world currency.

and Canada.

The US $ is the World Currency because the US is the only country in the World that exports it's currency more than $0.5 Trillion/year. Like a virus really. It's that simple if the US didn't export $ it wouldn't be the reserve currency.

The other part about sovereigns being able to "print all they want" is a falsehood without context.

First of all, when people refer to "printing" it usually means "spending" although I'm not sure they think of it in those terms. The actual printing of physical currency/coins moves money from checking accounts in the banking system to petty cash accounts. No new money is created by that kind of "printing". About 2% of US $ is coins or currency, the rest exists only on balance sheets.

Secondly, a sovereign is able to buy anything for sale in it's own currency as long as the resource being bought exists and is for sale. You can't buy something that doesn't exist. The constraint on money creation is resources not arithmetic, which is the most widely misunderstood characteristic of fiat currencies.

Further, a sovereign that HAS NO DEBT IN A FOREIGN CURRENCY has zero risk of insolvency there is no liability (in it's own currency) a sovereign cannot satisfy. The US holds no foreign debt. Nor does Canada, Australia, Japan, UK, etc. as far as I know. Every member in the Eurozone is a de-facto holder of foreign debt (the Euro member countries cannot freely create Euro's. They are more like private borrowers).

gov'ts were in a position to print their own money and not have to pay interest thru the private banking sector for it.

James, this is another myth unless you are talking about the Eurozone. The US Federal government does not pay interest to the banking sector, it pays interest to holders of Treasury securities. To do so was a CHOICE not a requirement. Paying interest on previously created monies was voluntary. Congress created the banking system (for the US) through the Federal Reserve Act of 1913, which created and governs the banking system, and chose to pay interest later after WWI I believe (probably as a give-away to bankers who didn't think they made enough money off of WWi). MRW knows a lot more about this history if he's around.

Interest paid on the "debt" (all money is debt, interest or not by definition) is a net transfer of funds to the private sector (those who hold Treasury securities). Those funds increase the money supply. Anyone can hold Treasury securities, not just banks. They are a risk-free investment vehicle (the only one).

Further, it is the Fed that sets interest rates, not the bond-holders ("bond vigilantes") as they are referred to. 10 years of zero-interest rates post 2008 should be proof enough of that.

Treasury securities (bonds) move $ from a checking account at the Fed to a savings account at the FED. They are $ that earn interest. This is all explained in the Mosler pdf I linked to.

In double-entry accounting a National Debt™ for the government is NATIONAL SAVINGS for the citizens, as are the interest payments. All this worry about sovereign debt is silliness. Without sovereign debt the currency of issue wouldn't exist. Sovereign debt is our money (although the elites won't let us acquire much of it).

ashley albanese , May 2, 2018 6:40:23 PM | 177
May2 172

Of course the Marxist critique of and challenge to Capitalism was central in all this ! The West was competing with the East ( simplifying)and when this situation changed with Anglo Hegemony 1990 , these balances that had seen overall development towards the 'welfare state ' disintegrated .

Once the U S got its opportunistic run at this situation, crudely grasping for further power we rapidly reached the present situation , with its repeat of World War scenarios , as competing economic / militarised blocs do exactly that !

paulmeli , May 2, 2018 6:49:08 PM | 178
@ SteveK9 @ 160

Yes, Mosler not being an economist is a feature, not a bug. I agree, economists are idiots, but I suspect they're paid idiots. What's the Upton Sinclair quote ?

From where I sit MMT savvy economists are not idiots. They are however outcasts. If your not an insider you're an outsider, and outsiders don't get to make the big money, if they don't starve.

Here's a video excerpt regarding our pre-eminent economist Paul Krugman lest you think he isn't in on the con:

"Never Touch the Money System"

james , May 2, 2018 7:51:46 PM | 179
@176 paulmeli.. thanks.. i had to read your comment a few times, and it still isn't sinking in fully.. i am getting some of it, but maybe it is my conspiracy run brain that wants to know how we've been screwed over by the banks.. that is what i believe has happened...MRW.. haven't seen him in a good while.. every time he would come all my negative stereo types about the private banking sector were put on hold, as i recall!

i think a lot of this has to do with exporting / importing between countries... especially the part about holding foreign debt.. how does another country pay for something? this is why we read today of how russia, china and iran are getting into financial arrangements whereby they don't have to go thru the us$.. wasn't this a good part of the reason the usa went to war in iraq, or libya? iraq and libya wanted to trade in euros, as opposed to us$.. well - hopefully MRW can come and bring me back to reality! it seems the world financial markets are one big ponzi scheme... think of the derivative markets.. one is not trading in some actual commodity.. it is increasingly opaque and shrouded in speculation, while run on computers...

i am sorry paul, but i can only go so far in my understanding here.. as i understand it, something is very wrong in the financial system at present.. it is also the reason these financial sanction games are typically a lead up to war... one group has undue power and influence over the worlds finances - the usa - and they exercise this clout via sanctions, and if that doesn't work - war / regime change - etc. etc... obviously i am missing something here, but i will be damned if i buy the official hokum from an economist! thanks for trying to educate me.. n

Josh , May 2, 2018 7:56:05 PM | 180
I despise Netanyahu but please change the headline from Netanyahoo as Yahoo was used as an antisemtic slur in the past. I'm sure the author was not aware of this outdated meaning but it does the cause harm. Thank you.
paulmeli , May 2, 2018 8:07:23 PM | 181
james @ 179
something is very wrong in the financial system at present..

I think it's always been this way but now the corruption is so out in the open it seems like it's worse. I'm not sure it is.

The way finance corrupts is that obscene riches are offered to state leaders to sell out their own citizens for pennies on the dollar. And they do it, because if they don't regime change will follow. It's similar to the way corporate raiders take over businesses, sell off the assets and load the business up with debt, then sell what's left. With all of that debt said business has no chance of success. A handful of financial guys (parasites of the worse kind) walk away with the cash.

Corporate strip-mining - the business plan is simple and it's always the same - no matter if it's a business or a country.

david hogg , May 2, 2018 8:23:36 PM | 182
Something to keep in mind about all of this Iran business is that Trump can now move full speed ahead with Bolton and Pompeo in place. I find it oddly comforting that, generally speaking, Trump and his administration make no attempt to cloak their psychopathy in coded language. I thought these remarks from Pompeo yesterday as he addressed the lackeys at Foggy Bottom yesterday particularly illuminating in this regard:

"I talked at my hearing about the fact that this nation is so exceptional, and so incredibly blessed and the facts that derive from that are that it also creates a responsibility, a duty for America all across the world. And I know for certain that America can't execute that duty, can't achieve its objectives absent you all. Absent executing America's foreign policy in every corner of the world with incredible vigor and incredible energy. And I look forward to helping you all advance that."

spudski , May 2, 2018 8:44:26 PM | 183
paulmeli @ 181

Excellent précis of corporate/country asset stripping.

Pft , May 2, 2018 9:16:21 PM | 184
@paulmeli 176

Money supply increases with debt creation and decreases with debt payment. Wipe out all debt and money supply is zero. Taking out a loan is an example of money creation. The money does not exist in the system till its deposited into your account. Paying off the mortgage depletes the money supply.

Its true that the government does not pay interest on money the Fed loans them. Thats why so little is loaned directly to the government until the last crash. Money is not created by interest. That money does not exist without new debt. The government borrows the money to pay the interest.

A key reason the US is the reserve currency is OPEC. OPEC serves Big Oil interests which is interlocked with Big Banking and requires purchases of Oil to be in USD. Hence the name Petro Dollar. OPEC may produce the oil but its The Big Oil (4 sisters) that transports most of it to market, refines much of it and provides the equipment for OPEC members to get the oil out of the ground.

We also export a tremendous amount of food that requires payment in USD, and US manufacturing is now in China and consumer debt allows us to purchase a great amount of goods from China in USD. Manufacturers in China need to pay expenses in RMB so sell USD to Chinese banks. Chinas Central Bank Prints up RMB at no interest to buy the USD and then loans it to the US at interest.

Its a perfect system and is basically why the USD will never fail unless those in control want it to.

[May 02, 2018] Neoliberalism and Christianity

Highly recommended!
Money quote: " neoliberalism is the fight of finance to subdue society at large, and to make the bankers and creditors today in the position that the landlords were under feudalism."
Notable quotes:
"... ... if you take the Bible literally, it's the fight in almost all of the early books of the Old Testament, the Jewish Bible, all about the fight over indebtedness and debt cancellation. ..."
"... neoliberalism is the fight of finance to subdue society at large,and to make the bankers and creditors today in the position that the landlords were under feudalism. ..."
"... They call themselves free marketers, but they realize that you cannot have neoliberalism unless you're willing to murder and assassinate everyone who promotes an alternative ..."
"... Just so long as you remember that most of the strongest and most moving condemnations of greed and money in the ancient and (today) western world are also Jewish--i.e. Isaiah, Jeremiah, Micah, the Gospels, Letter of James, etc. ..."
"... The history of Jewish banking after the fall or Rome is inextricable from cultural anti-judaism of Christian west and east and de facto marginalization/ghettoization of Jews from most aspects of social life. The Jewish lending of money on interest to gentiles was both necessary for early mercantilist trade and yet usury was prohibited by the church. So Jewish money lenders were essential to and yet ostracized within European economies for centuries. ..."
"... Now Christianity has itself long given up on the tradition teaching against usury of course. ..."
"... In John, for instance most of the references to what in English is translated as "the Jews" are in Greek clearly references to "the Judaeans"--and especially to the ruling elite among the southern tribe in bed with the Romans. ..."
May 02, 2018 | www.moonofalabama.org

karlof1 , May 1, 2018 2:27:06 PM | 13

Just finished reading the fascinating Michael Hudson interview I linked to on previous thread; but since we're discussing Jews and their religion in a tangential manner, I think it appropriate to post here since the history Hudson explains is 100% key to the ongoing pain us humans feel and inflict. My apologies in advance, but it will take this long excerpt to explain what I mean:

"Tribes: When does the concept of a general debt cancellation disappear historically?

"Michael: I guess in about the second or third century AD it was downplayed in the Bible. After Jesus died, you had, first of all, St Paul taking over, and basically Christianity was created by one of the most evil men in history, the anti-Semite Cyril of Alexandria. He gained power by murdering his rivals, the Nestorians, by convening a congress of bishops and killing his enemies. Cyril was really the Stalin figure of Christianity, killing everybody who was an enemy, organizing pogroms against the Jews in Alexandria where he ruled.

"It was Cyril that really introduced into Christianity the idea of the Trinity. That's what the whole fight was about in the third and fourth centuries AD. Was Jesus a human, was he a god? And essentially you had the Isis-Osiris figure from Egypt, put into Christianity. The Christians were still trying to drive the Jews out of Christianity. And Cyril knew the one thing the Jewish population was not going to accept would be the Isis figure and the Mariolatry that the church became. And as soon as the Christian church became the establishment rulership church, the last thing it wanted in the West was debt cancellation.

"You had a continuation of the original Christianity in the Greek Orthodox Church, or the Orthodox Church, all the way through Byzantium. And in my book And Forgive Them Their Debts, the last two chapters are on the Byzantine echo of the original debt cancellations, where one ruler after another would cancel the debts. And they gave very explicit reason for it: if we don't cancel the debts, we're not going to be able to field an army, we're not going to be able to collect taxes, because the oligarchy is going to take over. They were very explicit, with references to the Bible, references to the jubilee year. So you had Christianity survive in the Byzantine Empire. But in the West it ended in Margaret Thatcher. And Father Coughlin.

"Tribes: He was the '30s figure here in the States.

"Michael: Yes: anti-Semite, right-wing, pro-war, anti-labor. So the irony is that you have the people who call themselves fundamentalist Christians being against everything that Jesus was fighting for, and everything that original Christianity was all about."

Hudson says debt forgiveness was one of the central tenets of Judaism: " ... if you take the Bible literally, it's the fight in almost all of the early books of the Old Testament, the Jewish Bible, all about the fight over indebtedness and debt cancellation. "

Looks like I'll be purchasing Hudson's book as he's essentially unveiling a whole new, potentially revolutionary, historical interpretation.

psychohistorian , May 1, 2018 3:31:50 PM | 26
@ karlof1 with the Michale Hudson link....thanks!!

Here is the quote that I really like from that interview
"
Michael: No. You asked what is the fight about? The fight is whether the state will be taken over, essentially to be an extension of Wall Street if you do not have government planning. Every economy is planned. Ever since the Neolithic (era), you've had to have (a form of) planning. If you don't have a public authority doing the planning, then the financial authority becomes the planners. So globalism is in the financial interest –Wall Street and the City of London, doing the planning, not governments. They will do the planning in their own interest. So neoliberalism is the fight of finance to subdue society at large,and to make the bankers and creditors today in the position that the landlords were under feudalism.
"

karlof1, please email me as I would like to read the book as well and maybe we can share a copy.

And yes, it is relevant to Netanyahoo and his ongoing passel of lies because humanity has been told and been living these lives for centuries...it is time to stop this shit and grow up/evolve

james , May 1, 2018 10:30:01 PM | 96
@13 / 78 karlof1... thanks very much for the links to michael hudson, alastair crooke and the bruno maraces articles...

they were all good for different reasons, but although hudson is being criticized for glossing over some of his talking points, i think the main thrust of his article is very worthwhile for others to read! the quote to end his article is quite good "The question is, who do you want to run the economy? The 1% and the financial sector, or the 99% through politics? The fight has to be in the political sphere, because there's no other sphere that the financial interests cannot crush you on."

it seems to me that the usa has worked hard to bad mouth or get rid of government and the concept of government being involved in anything.. of course everything has to be run by a 'private corp' - ie corporations must run everything.. they call them oligarchs when talking about russia, lol - but they are corporations when they are in the usa.. slight rant..

another quote i especially liked from hudson.. " They call themselves free marketers, but they realize that you cannot have neoliberalism unless you're willing to murder and assassinate everyone who promotes an alternative ." that sounds about right...

@ 84 juliania.. aside from your comments on hudsons characterization of st paul "the anti-Semite Cyril of Alexandria" further down hudson basically does the same with father coughlin - https://en.wikipedia.org/wiki/Charles_Coughlin.. he gets the anti-semite tag as well.. i don't know much about either characters, so it's mostly greek to me, but i do find some of hudsons views especially appealing - debt forgiveness being central to the whole article as i read it...

it is interesting my own view on how money is so central to the world and how often times I am incapable of avoiding the observation of the disproportionate number of Jewish people in banking.. I guess that makes me anti-semite too, but i don't think of myself that way.. I think the obsession with money is killing the planet.. I don't care who is responsible for keeping it going, it is killing us...

WJ | May 1, 2018 10:48:58 PM | 100

James @96,

Just so long as you remember that most of the strongest and most moving condemnations of greed and money in the ancient and (today) western world are also Jewish--i.e. Isaiah, Jeremiah, Micah, the Gospels, Letter of James, etc.

The history of Jewish banking after the fall or Rome is inextricable from cultural anti-judaism of Christian west and east and de facto marginalization/ghettoization of Jews from most aspects of social life. The Jewish lending of money on interest to gentiles was both necessary for early mercantilist trade and yet usury was prohibited by the church. So Jewish money lenders were essential to and yet ostracized within European economies for centuries.

Now Christianity has itself long given up on the tradition teaching against usury of course.

WJ , May 1, 2018 8:23:40 PM | 88
Juliana @84,

I too greatly admire the work of Hudson but he consistently errs and oversimplifies whenever discussing the beliefs of and the development of beliefs among preNicene followers of the way (as Acts puts is) or Christians (as they came to be known in Antioch within roughly eight or nine decades after Jesus' death.) Palestinian Judaism in the time of Jesus was much more variegated than scholars even twenty years ago had recognized. The gradual reception and interpretation of the Dead Sea Scrolls in tandem with renewed research into Phili of Alexandria, the Essenes, the so-called Sons of Zadok, contemporary Galilean zealot movements styles after the earlier Maccabean resistance, the apocalyptism of post exilic texts like Daniel and (presumably) parts of Enoch--all paint a picture of a highly diverse group of alternatives to the state-Church once known as Second Temple Judaism that has been mistaken as undisputed Jewish "orthodoxy" since the advent of historical criticism.

The Gospel of John, for example, which dates from betweeen 80-120 and is the record of a much earlier oral tradition, is already explicitly binitarian, and possibly already trinitarian depending on how one understands the relationship between the Spirit or Advocate and the Son. (Most ante-Nicene Christians understood the Spirit to be *Christ's* own spirit in distributed form, and they did so by appeal to a well-developed but still largely under recognized strand in Jewish angelology.)

The "theological" development of Christianity occurred much sooner that it has been thought because it emerged from an already highly theologized strand or strands of Jewish teaching that, like Christianity itself, privileged the Abrahamic covenant over the Mosaic Law, the testament of grace over that of works, and the universal scope of revelation and salvation as opposed to any political or ethnic reading of the "Kingdom."

None of these groups were part of the ruling class of Judaean priests and levites and their hangers on the Pharisees.

In John, for instance most of the references to what in English is translated as "the Jews" are in Greek clearly references to "the Judaeans"--and especially to the ruling elite among the southern tribe in bed with the Romans.

So the anti-Judaism/Semiti of John's Gispel largely rests on a mistranslation. In any event, everything is much more complex than Hudson makes it out to be. Christian economic radicalism is alive and well in the thought of Gregory of Nysa and Basil the Great, who also happened to be Cappadocian fathers highly influential in the development of "orthodox" Trinitarianism in the fourth century.

I still think that Hudson's big picture critique of the direction later Christianity took is helpful and necessary, but this doesn't change the fact that he simplifies the origins, development, and arguably devolution of this movement whenever he tries to get specific. It is a worthwhile danger given the quality of his work in historical economics, but still one has to be aware of.

[Apr 02, 2018] How Many Opioid Overdoses Are Suicides

Notable quotes:
"... By Martha Bebinger of WBUR. Originally published at Kaiser Health News ..."
"... The National Suicide Prevention Lifeline is 800-273-8255. ..."
"... This story is part of a partnership that includes WBUR , NPR and Kaiser Health News. ..."
Apr 02, 2018 | www.nakedcapitalism.com

Posted on March 30, 2018 by Yves Smith Yves here. See also this related Kaiser Health News story: Omissions On Death Certificates Lead To Undercounting Of Opioid Overdoses .

It takes a lot of courage for an addict to recover and stay clean. And it is sadly not news that drug addiction and high levels of prescription drug use are signs that something is deeply broken in our society. There are always some people afflicted with deep personal pain but our system is doing a very good job of generating unnecessary pain and desperation.

By Martha Bebinger of WBUR. Originally published at Kaiser Health News

Mady Ohlman was 22 on the evening some years ago when she stood in a friend's bathroom looking down at the sink.

"I had set up a bunch of needles filled with heroin because I wanted to just do them back-to-back-to-back," Ohlman recalled. She doesn't remember how many she injected before collapsing, or how long she lay drugged-out on the floor.

"But I remember being pissed because I could still get up, you know?"

She wanted to be dead, she said, glancing down, a wisp of straight brown hair slipping from behind an ear across her thin face.

At that point, said Ohlman, she'd been addicted to opioids -- controlled by the drugs -- for more than three years.

"And doing all these things you don't want to do that are horrible -- you know, selling my body, stealing from my mom, sleeping in my car," Ohlman said. "How could I not be suicidal?"

For this young woman, whose weight had dropped to about 90 pounds, who was shooting heroin just to avoid feeling violently ill, suicide seemed a painless way out.

"You realize getting clean would be a lot of work," Ohlman said, her voice rising. "And you realize dying would be a lot less painful. You also feel like you'll be doing everyone else a favor if you die."

Ohlman, who has now been sober for more than four years, said many drug users hit the same point, when the disease and the pursuit of illegal drugs crushes their will to live. Ohlman is among at least 40 percent of active drug users who wrestle with depression, anxiety or another mental health issue that increases the risk of suicide.

Measuring Suicide Among Patients Addicted To Opioids

Massachusetts, where Ohlman lives, began formally recognizing in May 2017 that some opioid overdose deaths are suicides. The state confirmed only about 2 percent of all overdose deaths as suicides, but Dr. Monica Bhare l, head of the Massachusetts Department of Public Health, said it's difficult to determine a person's true intent.

"For one thing, medical examiners use different criteria for whether suicide was involved or not," Bharel said, and the "tremendous amount of stigma surrounding both overdose deaths and suicide sometimes makes it extremely challenging to piece everything together and figure out unintentional and intentional."

Research on drug addiction and suicide suggests much higher numbers.

"[Based on the literature that's available], it looks like it's anywhere between 25 and 45 percent of deaths by overdose that may be actual suicides," said Dr. Maria Oquendo , immediate past president of the American Psychiatric Association.

Oquendo pointed to one study of overdoses from prescription opioids that found nearly 54 percent were unintentional. The rest were either suicide attempts or undetermined.

Several large studies show an increased risk of suicide among drug users addicted to opioids, especially women. In a study of about 5 million veterans, women were eight times as likely as others to be at risk for suicide, while men faced a twofold risk.

The opioid epidemic is occurring at the same time suicides have hit a 30-year high , but Oquendo said few doctors look for a connection.

"They are not monitoring it," said Oquendo, who chairs the department of psychiatry at the University of Pennsylvania. "They are probably not assessing it in the kinds of depths they would need to prevent some of the deaths."

That's starting to change. A few hospitals in Boston, for example, aim to ask every patient admitted about substance use, as well as about whether they've considered hurting themselves.

"No one has answered the chicken and egg [problem]," said Dr. Kiame Mahaniah , a family physician who runs the Lynn Community Health Center in Lynn, Mass. Is it that patients "have mental health issues that lead to addiction, or did a life of addiction then trigger mental health problems?"

With so little data to go on, "it's so important to provide treatment that covers all those bases," Mahaniah said.

'Deaths Of Despair'

When doctors do look deeper into the reasons patients addicted to opioids become suicidal, some economists predict they'll find deep reservoirs of depression and pain.

In a seminal paper published in 2015, Princeton economists Angus Deaton and Anne Case tracked falling marriage rates, the loss of stable middle-class jobs and rising rates of self-reported pain. The authors say opioid overdoses, suicides and diseases related to alcoholism are all often "deaths of despair."

"We think of opioids as something that's thrown petrol on the flames and made things infinitely worse," Deaton said, "but the underlying deep malaise would be there even without the opioids."

Many economists agree on remedies for that deep malaise. Harvard economics professor David Cutle r said solutions include a good education, a steady job that pays a decent wage, secure housing, food and health care.

"And also thinking about a sense of purpose in life," Cutler said. "That is, even if one is doing well financially, is there a sense that one is contributing in a meaningful way?"

Tackling Despair In The Addiction Community

"I know firsthand the sense of hopelessness that people can feel in the throes of addiction," said Michael Botticelli , executive director of the Grayken Center for Addiction at Boston Medical Center; he is in recovery for an addiction to alcohol.

Botticelli said recovery programs must help patients come out of isolation and create or recreate bonds with family and friends.

"The vast majority of people I know who are in recovery often talk about this profound sense of re-establishing -- and sometimes establishing for the first time -- a connection to a much larger community," Botticelli said.

Ohlman said she isn't sure why her attempted suicide, with multiple injections of heroin, didn't work.

"I just got really lucky," Ohlman said. "I don't know how."

A big part of her recovery strategy involves building a supportive community, she said.

"Meetings; 12-step; sponsorship and networking; being involved with people doing what I'm doing," said Ohlman, ticking through a list of her priorities.

There's a fatal overdose at least once a week within her Cape Cod community, she said. Some are accidental, others not. Ohlman said she's convinced that telling her story, of losing and then finding hope, will help bring those numbers down.

The National Suicide Prevention Lifeline is 800-273-8255.

This story is part of a partnership that includes WBUR , NPR and Kaiser Health News.

[Mar 30, 2018] The Death Of The Liberal World Order by Leonid Savin

Highly recommended!
Notable quotes:
"... And, quoting his colleague Archon Fung from the Harvard Kennedy School, " American politics is no longer characterized by the rule of the median voter, if it ever was. Instead, in contemporary America the median capitalist rules as both the Democratic and Republican parties adjust their policies to attract monied interests." And finally Mr. Ringen adds, "American politicians are aware of having sunk into a murky bog of moral corruption but are trapped." ..."
"... Trump merely reflects the dysfunctionality and internal contradictions of American politics. He is the American Gorbachev, who kicked off perestroika at the wrong time. ..."
"... Global financial services exercise monopolistic power over national policies, unchecked by any semblance of global political power. Trust is haemorrhaging. The European Union, the greatest ever experiment in super-national democracy, is imploding ..."
"... Probably this is because the Western model of neoliberalism does not provide any real freedom of commerce, speech, or political activity, but rather imposes a regime of submission within a clearly defined framework. ..."
"... america is going through withdraw from 30 years of trickledown crap. the young are realizing that the shithole they inherit does not have to be a shithole, and the old pathetic white old men who run the show will be dead soon. ..."
"... The liberal order is dying because it is led by criminally depraved Predators who have pauperized the labor force and created political strife, though the populists don't pose much threat to the liberal-order Predators. ..."
"... However by shipping the productive Western economies overseas to Asia, the US in particular cannot finance and physically support a military empire or the required R&D to stay competitive on the commercial and military front. ..."
"... So the US Imperialists are being eclipsed by the Sino-Russo Alliance and wants us to believe this is a great tragedy. Meanwhile the same crew of Liberal -neoCon Deep Staters presses on with wars and tensions that are slipping out of control. ..."
Mar 30, 2018 | www.zerohedge.com

Authored Leonid Savin via Oriental Review,

A few days ago the president of the Council on Foreign Relations, Richard Haass, published an article, titled "Liberal World Order, R.I.P." In it, he states that the current threat to the liberal world order is coming not from rogue states, totalitarian regimes, religious fanatics, or obscurantist governments (special terms used by liberals when referring to other nations and countries that have not pursued the Western capitalist path of development), but from its primary architect -- the United States of America.

Haass writes: " Liberalism is in retreat. Democracies are feeling the effects of growing populism. Parties of the political extremes have gained ground in Europe. The vote in the United Kingdom in favor of leaving the EU attested to the loss of elite influence. Even the US is experiencing unprecedented attacks from its own president on the country's media, courts, and law-enforcement institutions. Authoritarian systems, including China, Russia, and Turkey, have become even more top-heavy. Countries such as Hungary and Poland seem uninterested in the fate of their young democracies

"We are seeing the emergence of regional orders. Attempts to build global frameworks are failing."

Haass has previously made alarmist statements , but this time he is employing his rhetoric to point to the global nature of this phenomenon. Although between the lines one can easily read, first of all, a certain degree of arrogance -- the idea that only we liberals and globalists really know how to administer foreign policy -- and second, the motifs of conspiracy.

"Today's other major powers, including the EU, Russia, China, India, and Japan, could be criticized for what they are doing, not doing, or both."

Probably this list could be expanded by adding a number of Latin American countries, plus Egypt, which signs arms deals with North Korea while denying any violation of UN sanctions, and the burgeoning Shiite axis of Iran-Iraq-Syria-Lebanon.

But Haass is crestfallen over the fact that it is Washington itself that is changing the rules of the game and seems completely uninterested in what its allies, partners, and clients in various corners of the world will do.

" America's decision to abandon the role it has played for more than seven decades thus marks a turning point. The liberal world order cannot survive on its own, because others lack either the interest or the means to sustain it. The result will be a world that is less free, less prosperous, and less peaceful, for Americans and others alike."

Richard Haass's colleague at the CFR, Stewart Patrick, quite agrees with the claim that it is the US itself that is burying the liberal world order . However, it's not doing it on its own, but alongside China. If the US had previously been hoping that the process of globalization would gradually transform China (and possibly destroy it, as happened to the Soviet Union earlier), then the Americans must have been quite surprised by how it has actually played out. That country modernized without being Westernized, an idea that had once been endorsed by the leader of the Islamic revolution in Iran, Ayatollah Khomeini.

Now China is expanding its influence in Eurasia in its own way, and this is for the most part welcomed by its partner countries.

But this has been a painful process for the US, as it is steadily and irrevocably undermining its hegemony.

"Its long-term ambition is to dismantle the U.S. alliance system in Asia, replacing it with a more benign (from Beijing's perspective) regional security order in which it enjoys pride of place, and ideally a sphere of influence commensurate with its power.

China's Belt and Road initiative is part and parcel of this effort, offering not only (much-needed) infrastructure investments in neighboring countries but also the promise of greater political influence in Southeast, South, and Central Asia. More aggressively, China continues to advance outrageous jurisdictional claims over almost the entirety of the South China Sea , where it continues its island-building activities, as well as engaging in provocative actions against Japan in the East China Sea," writes Patrick.

And as for the US:

"The United States, for its part, is a weary titan, no longer willing to bear the burdens of global leadership, either economically or geopolitically.

Trump treats alliances as a protection racket, and the world economy as an arena of zero-sum competition. The result is a fraying liberal international order without a champion willing to invest in the system itself. "

One can agree with both authors' assessments of the changed behavior of one sector of the US establishment, but this is about more than just Donald Trump (who is so unpredictable that he has staffed his own team with a member of the very swamp he was preparing to drain) and North American populism. One needs to look much deeper.

In his book, Nation of Devils: Democratic Leadership and the Problem of Obedience , Stein Ringen, a Norwegian statesman with a history of service in international institutions, notes:

"Today, American democratic exceptionalism is defined by a system that is dysfunctional in all the conditions that are needed for settlement and loyalty...

Capitalism has collapsed into crisis in an orgy of deregulation. Money is transgressing into politics and undermining democracy itself ."

And, quoting his colleague Archon Fung from the Harvard Kennedy School, " American politics is no longer characterized by the rule of the median voter, if it ever was. Instead, in contemporary America the median capitalist rules as both the Democratic and Republican parties adjust their policies to attract monied interests." And finally Mr. Ringen adds, "American politicians are aware of having sunk into a murky bog of moral corruption but are trapped."

Trump merely reflects the dysfunctionality and internal contradictions of American politics. He is the American Gorbachev, who kicked off perestroika at the wrong time. Although it must be conceded that if Hillary Clinton had become president, the US collapse would have been far more painful, particularly for the citizens of that country. We would have seen yet more calamitous reforms, a swelling influx of migrants, a further decline in the nation's manufacturing base, and the incitement of new conflicts. Trump is trying to keep the body of US national policy somewhat alive through hospice care, but what's really needed is a major restructuring, including far-reaching political reforms that would allow the country's citizens to feel that they can actually play a role in its destiny.

These developments have spread to many countries in Europe, a continent that, due to its transatlantic involvement, was already vulnerable and susceptible to the current geopolitical turbulence. The emergence of which, by the way, was largely a consequence of that very policy of neoliberalism.

Stein Ringen continues on that score:

"Global financial services exercise monopolistic power over national policies, unchecked by any semblance of global political power. Trust is haemorrhaging. The European Union, the greatest ever experiment in super-national democracy, is imploding "

It is interesting that panic has seized Western Europe and the US -- the home of transatlanticism, although different versions of this recipe for liberalism have been employed in other regions -- suffice it to recall the experience of Singapore or Brazil. But they don't seem as panicked there as in the West.

Probably this is because the Western model of neoliberalism does not provide any real freedom of commerce, speech, or political activity, but rather imposes a regime of submission within a clearly defined framework. Therefore, the destruction of the current system entails the loss of all those dividends previously enjoyed by the liberal political elites of the West that were obtained by speculating in the stock market, from the mechanisms of international foreign-exchange payments (the dollar system), and through the instruments of supranational organizations (the UN, WTO, and World Bank). And, of course, there are the fundamental differences in the cultural varieties of societies.

In his book The Hidden God, Lucien Goldmann draws some interesting conclusions, suggesting that the foundations of Western culture have rationalistic and tragic origins, and that a society immersed in these concepts that have "abolish[ed] both God and the community [soon sees] the disappearance of any external norm which might guide the individual in his life and actions." And because by its very nature liberalism must carry on, in its mechanical fashion, "liberating" the individual from any form of structure (social classes, the Church, family, society, and gender, ultimately liberating man from his very self), in the absence of any standards of deterrence, it is quite logical that the Western world was destined to eventually find itself in crisis. And the surge of populist movements, protectionist measures, and conservative policies of which Haass and other liberal globalists speak are nothing more than examples of those nations' instinct for self-preservation. One need not concoct conspiracy theories about Russia or Putin interfering in the US election (which Donald Trump has also denied, noting only that support was seen for Hillary Clinton, and it is entirely true that a portion of her financial backing did come from Russia). The baseline political decisions being made in the West are in step with the current crisis that is evident on so many levels. It's just that, like always, the Western elites need their ritual whipping boy(although it would be more accurate to call it a human sacrifice). This geopolitical shake-up began in the West as a result of the implicit nature of the very project of the West itself.

But since alternative development scenarios exist, the current system is eroding away. And other political projects are starting to fill the resultant ideological void -- in both form as well as content.

Thus it's fairly likely that the current crisis of liberalism will definitively bury the unipolar Western system of hegemony.

And the budding movements of populism and regional protectionism can serve as the basis for a new, multipolar world order.

J S Bach Fri, 03/30/2018 - 22:48 Permalink

Oh, Wicked Witch of the West Wing, the cleansing fire awaits thy demise! Those meds can only keep you standing for so long. Keep tripping. Keep stumbling. Satan calls you to him. The day approacheth. Tick tock tick tock. 👹😂

beepbop -> TeamDepends Fri, 03/30/2018 - 23:01 Permalink

The Death Of The Liberal World Order

The Re-Birth Of the Neocon World Disorder

Neocons=Bolsheviks=Zionists. Over 100 years of bloodshed and mayhem.

dogsandhoney2 -> J S Bach Fri, 03/30/2018 - 23:05 Permalink

hillery-cfr neoliberalism is a right-wing politic, actually.

HedgeJunkie -> carbonmutant Fri, 03/30/2018 - 23:04 Permalink

Democracy ultimately melts down into chaos. We have a perfectly good US Constitution, why don't we go back to using it as written? That said, I am for anything that makes the elites become common.

curbjob -> carbonmutant Fri, 03/30/2018 - 23:26 Permalink

Democracy is a form of government. Populism is a movement. Populist movements come about when the current form of government is failing ... historically it seems they seldom choose wisely.

Dilluminati Fri, 03/30/2018 - 22:58 Permalink

Ridiculous cunt Hillary thinks after getting REJECTED by the voters in the USA that somehow being asked to "go the fuck away and shut the fuck up" makes her a women's leader. The cocksucker Soros and some of these other non-elected globalist should keep in mind that while everybody has a right to an opinion: it took the Clinton Crime Family and lots of corruption to create the scandals that sets a Clinton Crime Family member aside, and why Soros was given a free pass on election meddling and not others requires congressional investigation and a special prosecutor. And then there is that special kind of legal and ignorant opinion like David Hogg who I just disagree with, making him in my opinion and many fellow NRA members a cocksucker and a cunt. I'd wish shingles on David Hogg, Hillary Clinton, and Soros.

Theos Fri, 03/30/2018 - 23:02 Permalink

bullshit

america is going through withdraw from 30 years of trickledown crap. the young are realizing that the shithole they inherit does not have to be a shithole, and the old pathetic white old men who run the show will be dead soon.

all i see is a bunch of fleeting old people who found facebook 10 years late are temporarily empowered since they can now connect with other equally impotent old people.

Posa Fri, 03/30/2018 - 23:10 Permalink

The usual self-serving swill from the Best and the Brightest of the Predator Class out of the CFR via Haas.

The liberal order aka the New British Empire, was born 70 years ago by firebombing and nuking undefended civilian targets. It proceeded to launch serial genocidal rampages in the Koreas, SE Asia, Latin America until finally burning down a large portion of the Middle East.

The fact that there has not been a catastrophic nuclear war is pure dumb luck. The Deep State came within seconds of engineering a nuclear cataclysm off the waters of Cuba in 1962. When JFK started dismantling the CIA Deep State and ending the Cold War with the USSR, Dulles dispatched a CIA hit-squad to gun down the President. (RFK and Nixon immediately understood the assassination was a CIA-led wet-works operation since they chaired the assassination committees themselves in the past).

The liberal order is dying because it is led by criminally depraved Predators who have pauperized the labor force and created political strife, though the populists don't pose much threat to the liberal-order Predators.

However by shipping the productive Western economies overseas to Asia, the US in particular cannot finance and physically support a military empire or the required R&D to stay competitive on the commercial and military front.

So the US Imperialists are being eclipsed by the Sino-Russo Alliance and wants us to believe this is a great tragedy. Meanwhile the same crew of Liberal -neoCon Deep Staters presses on with wars and tensions that are slipping out of control.

Yen Cross Fri, 03/30/2018 - 23:17 Permalink

I'll pay extra for a ticket to the George Soros funeral. That's like Game-7 at the Libtard world series!

devnickle Fri, 03/30/2018 - 23:22 Permalink

Death to globalism. It is the Satan World Order.

Grandad Grumps Fri, 03/30/2018 - 23:30 Permalink

Liberalism is anything but liberal... and I suppose that is the problem with it. It aims to do to the western world what Mao did to China and Stalin did to Russia. Many people were murdered or imprisoned and people had no rights, just obligations to dictators and their cronies.

I think this world is past the point where any benefit is gained from having "owners of the people", benevolent or otherwise. And we certainly do not benefit from perverted demonic entities even if they come bearing technology. The price is too high.

Populism goes along with essential freedoms for the human race.-

Yogizuna Fri, 03/30/2018 - 23:30 Permalink

As I told the idiotic retards who argued with me on Prodigy fucking 27 years ago, China will not change because of increased trading and the West making them wealthier. In fact, just the opposite. I wonder if they have caught on yet?

SuzerainGreyMole Fri, 03/30/2018 - 23:40 Permalink

One can understand the demise of the West of many levels. Downfall and then Renewal!

... ... ...

[Mar 29, 2018] Stagflation Alert As Wages And Salaries Roll Over

Mar 29, 2018 | www.zerohedge.com

What a difference two months makes. Back in January, with jobs aplenty and Americans spending like drunken sailors (sending their savings rate to the lowest on record), average hourly earnings suddenly spiked, unleashing the February VIXplosion over concerns that the Fed is behind the curve and will be forced to hike much more aggressively.

Well, fast forward to today, when all those "green shoots" are either dead or on the verge, and after today's Personal Income and Spending report, it appears that it is stagflation that is once looming.

First, core PCE, the Fed's favorite inflation gauge, rose 1.6%YoY in February 2017; the biggest gain since April 2017. Meanwhile, the PCE deflator rose by 1.8%, coming hotter than expected, just as the cellular service price collapse falls out of the Y/Y data, sending annual inflation higher by 0.3%, and is set spook the next set of CPI data. In other words, inflation is here.

Then there is the US consumer's reaction, and while until just a few months back the US savings rate was at all time lows, it has since jumped to 3.4%, the highest since August 2017, as households are no longer spending more than they can afford, a theme we observed at the end of 2017. This also means that spending is lagging income for 3 consecutive months, as something appears to have spooked American consumers.

That something may be wages and salaries themselves, because while the BLS' statistical approximation of average hourly wages is just that, the BEA's personal income actually carries wages and salaries data for both private and government workers. What it found is that after peaking in December, wage growth for these two worker groups has declined for 2 consecutive months, confirming what many have warned, namely that the recent period of benign wage increase is over, and now the slowdown begins.

[Mar 27, 2018] After Rising For 100 Years, Electricity Demand is Flat

Mar 27, 2018 | news.slashdot.org

(vox.com) The US electricity sector is in a period of unprecedented change and turmoil . Renewable energy prices are falling like crazy. Natural gas production continues its extraordinary surge. Coal, the golden child of the current administration, is headed down the tubes. In all that bedlam, it's easy to lose sight of an equally important (if less sexy) trend: Demand for electricity is stagnant. Thanks to a combination of greater energy efficiency, outsourcing of heavy industry, and customers generating their own power on site, demand for utility power has been flat for 10 years, and most forecasts expect it to stay that way. The die was cast around 1998, when GDP growth and electricity demand growth became "decoupled." This historic shift has wreaked havoc in the utility industry in ways large and small, visible and obscure. Some of that havoc is high-profile and headline-making, as in the recent requests from utilities (and attempts by the Trump administration) to bail out large coal and nuclear plants.

[Mar 23, 2018] How money work

Mar 23, 2018 | www.moonofalabama.org

Posted by: Allen | Mar 22, 2018 9:02:51 PM | 42


Allen , Mar 22, 2018 9:02:51 PM | 42

An Imaginary Conversation....

A modern fellow of genus Homo protests his innocence. "I don't work because I worked much harder before", says he. "I labored for ten years at a crap job earning $30,000 per year and that earned me the right to live in miserable conditions in which the loss of my job would have made me destitute in weeks. But, I was not content to labor as my fellows. I got a second job at $20,000 per year and I was so thrifty that I spent not a penny of it but banked it all so that at the end of my time I had $300,000, a princely sum. I invested it wisely at 10% and now I can live for the rest of my life, if modestly, off the proceeds of only my own sweat, my own thriftiness, and my own discipline. And, if there was any luck to it - in my not facing misfortune or ill health or any other calamity - that was the product of my own luck too. I owe nothing to anyone. What I have is due to myself alone, and those who have much more than I, it seems to me that they must have arrived at it the same as I, perhaps over generations. What is this social power you speak of when it is only individual labor and individual property that stems from it? It seems to me that you merely envy that which you are too lazy to earn for yourself."

"My dear independent fellow" says we, "let us understand the simple arithmetic of your claims. If your story is as you say and we ignore all else that you report, still at the end of ten years, we see only $200,000. And, if you continue to live at this admittedly low level, nevertheless, you will have run through your entire accumulated proceeds in only 6 years and eight months. More than this, by your accounting, it would take one and a third lifetimes to create a single lifetime without labor, and this at the exceedingly low standards and exceptionally favorable circumstances that you assume. How then are we to explain those who live without labor for generations, and this at a thousand or ten thousand times times the level that you report? How many generations of 'thrift' and 'hard work' would this require? What you claim is impossible for you and beyond impossibility for those who live above you. Where is this magic of 'individual labor and individual property' that you speak of?"

"But you forget interest", protests our friend. "My money makes money, and simply by the act of having some which is not consumed in day to day living, that which I save is augmented. It is this which grants me my independence."

"We forget as much as your money 'makes'," answers we, "which is nothing at all. Set your money on the table and leave it there for as long as you like. Nothing happens to it. It remains the same. It is only by setting it in motion as capital that anything whatever is 'made' and that 'making' is the product of labor, the same as your own. Your interest comes from the command of the labor of others, just as your own was once commanded and after 6 years and eight months not a speck of 'hard work', 'thrift', 'good luck' or 'wisdom' is left. Neither is there any trace of 'independence' or 'personal property' You now live by the labor of others... by the transformation of your pitiful 'savings' into Capital, no matter how small the sum. It is your ability to command the labor of others as a social power that gives you your ability and that you have a poor man's caricature of that process changes nothing other than to lay fraudulent your claims to the right. You might as well claim innate superiority or the right of the sword as did the slave master or the god-given hierarchy of obligations of the lord or even the phases of the moon, if you like. You eat without working because you have maneuvered yourself into a position in which others work to feed you. You are the opposite of what you claim."

"You're just trying to make me feel bad.", says our friend.

"We don't give a shit how you feel", says we. "It is modest enough what you do... just as you claim. It is your willingness to ignore what is closer to your face than your nose that we tire of. "

Our friend orders another beer and pretends to watch the hockey game though he would be hard pressed to name two players on either team.

Capital is therefore not only personal; it is a social power.

There it is...

psychohistorian , Mar 23, 2018 12:06:52 AM | 68
@ jivno who keeps asking how money works

http://www.globalresearch.ca/the-federal-reserve-cartel-the-eight-families/25080

hojo , Mar 23, 2018 4:11:22 AM | 78
jinvo @48
Here's an interesting 144-slide presentation on "Modern Monetary Theory" from J.D. Alt .

[Mar 22, 2018] It is my opinion that China, Russia, Iran, and probably additional countries decided to make a move after the brazen 2003 invasion of Iraq by the U.S. and others, and the massive financial fraud partly exposed in the U.S. and Britain in 2008 and afterwards, which fraud was not stopped and the perpetrators were bailed out and none were prosecuted.

Notable quotes:
"... China, Russia, et. al. realized that the debt-saturated U.S. was propped up by the fact that the U.S. "dollar" was the reserve banking and trading currency of the entire world and that the "Petrodollar" was one of the main pillars of it, and that this system was the main source of U.S. influence and power around the world and allowed the U.S. and friends to impose financial sanctions on other countries. They also saw that the U.S. was not using gold or silver as a type of support or backup for the financial system. Therefore, they developed their own computer servers to route orders between banks and financial companies that will operate outside of the SWIFT system dominated by the U.S. It is now operational and is called CIPS (Cross-Border Interbank Payment System)-- ..."
Mar 22, 2018 | turcopolier.typepad.com

robt willmann 21 March 2018 at 01:43 PM

John Minnerath,

In addition to the common desire of some (or many) human beings to exercise authority over other groups of people, I think Xi Jinping and his supporters want to complete the large and complex economic and financial projects they have started. It is not just the road and railroad and other infrastructure projects tied to the regional trading structure China has been working on, but a financial structure independent of the existing banking and financial system that was put together by the U.S. and Britain.

It is my opinion that China, Russia, Iran, and probably additional countries decided to make a move after the brazen 2003 invasion of Iraq by the U.S. and others, and the massive financial fraud partly exposed in the U.S. and Britain in 2008 and afterwards, which fraud was not stopped and the perpetrators were bailed out and none were prosecuted.

China, Russia, et. al. realized that the debt-saturated U.S. was propped up by the fact that the U.S. "dollar" was the reserve banking and trading currency of the entire world and that the "Petrodollar" was one of the main pillars of it, and that this system was the main source of U.S. influence and power around the world and allowed the U.S. and friends to impose financial sanctions on other countries. They also saw that the U.S. was not using gold or silver as a type of support or backup for the financial system. Therefore, they developed their own computer servers to route orders between banks and financial companies that will operate outside of the SWIFT system dominated by the U.S. It is now operational and is called CIPS (Cross-Border Interbank Payment System)--

http://www.chinadaily.com.cn/business/2015-10/08/content_22127404.htm

https://sputniknews.com/business/201603091036035210-vtb-bank-payment/

In addition, they are moving to break the Petrodollar. In the early 1970's, the U.S. made a non-treaty deal with Saudi Arabia that if they got the rest of OPEC to sell oil and gas to the whole world only in U.S. dollars and would plough some of the money back into U.S. government debt and into the stock market casino, the U.S. would protect the Saudi ruling family so it could run the entire country as its private business. This forced the whole world to get U.S. dollars in order to buy oil and gas, which further put the dollar in as banking reserves around the world, which further pushed the dollar into being used to settle much of the trade between countries.

However, now some contracts are being made to buy and sell oil and gas not in the U.S. dollar, but in other currencies, especially the Chinese renminbi (a/k/a yuan). Also, both China and Russia have been buying large amounts of gold for several years. To get around some of the U.S. sanctions prior to the Joint Comprehensive Plan of Action (JCPOA), Iran sold oil and gas in exchange for gold. Since gold is not a government created and ordered "fiat" money, it cannot be choked off by the SWIFT system or controlled through numbers on computer hard drives in banks.

Russia also remembers what happened after the collapse of the Soviet Union when the U.S. financial "experts" [sic] went there to set up a "wonderful" market-based economy, but what happened of course was the creation of a system to loot Mother Russia and establish a new oligarchy tied in with the U.S., Britain, and Israel.

In the early 1990's when the Soviet Union pulled out of eastern Europe, the U.S. had a chance to help the world be a safer and more peaceful place. The methods of medical diagnosis and surgical technology developed in the U.S. could have been the basis of a new foreign policy that would have voluntarily opened doors across the world.

But it was not to be. The desire of some to be king of the world pushed the chance of improvement aside. Nevertheless, today even autocratic governments see that having financial and governmental options can be a beneficial thing.

And to our immediate south, a movement has been going on for a while in Mexico to establish a money based on silver, promoted by Hugo Salinas Price and others--

http://www.plata.com.mx/enUS/More/322?idioma=2

For obvious reasons, I am not optimistic about Mexico, the deterioration of which has been a sad thing to see. It needs a new and real revolution.

Xi's move is not a unilateral thing. He had to have the support of the ruling committees in China. Keep your eye on the financial structure, gold, and silver.

[Mar 22, 2018] I've been waiting to see what happens with the SDR (Special Drawing Right). The IMF (International Monetary Fund) added it to the SDR basket in October 2016 after a lot of foot dragging by the US.

Notable quotes:
"... I see the global monetary reset currently underway as the slowly moving, but unstoppable, glacier that is forcing all other events. ..."
Mar 22, 2018 | turcopolier.typepad.com

EEngineer -> robt willmann... 21 March 2018 at 04:14 PM

I've been waiting to see what happens with the SDR (Special Drawing Right). The IMF (International Monetary Fund) added it to the SDR basket in October 2016 after a lot of foot dragging by the US. The AIIB (Asian Infrastructure Investment Bank) was setup largely as a Chinese alternative to the US dominated IMF and World Bank because they were not being given an appropriate "place at the table" in the IMF, which was founded as part of the Bretton Woods Agreement at the end of WWII.

I see the global monetary reset currently underway as the slowly moving, but unstoppable, glacier that is forcing all other events.

[Feb 05, 2018] Blockchain: what it is, what it does, and why you probably don't need one by Scott Adams Interest in blockchain is at a fever pitch lately. This is in large part due to the eye-popping price dy...

Feb 05, 2018 | andolfatto.blogspot.com

[Feb 05, 2018] Link to my past posts on the subject of Bitcoin and Blockchain

Feb 05, 2018 | andolfatto.blogspot.com

Sunday, January 21, 2018 Blockchain: what it is, what it does, and why you probably don't need one

Dilbert - by Scott Adams
Interest in blockchain is at a fever pitch lately. This is in large part due to the eye-popping price dynamics of Bitcoin --the original bad-boy cryptocurrency--which everyone knows is powered by blockchain ...whatever that is. But no matter. Given that even big players like Goldman Sachs are getting into the act (check out their super slick presentation here: Blockchain--The New Technology of Trust ) maybe it's time to figure out what all the fuss is about. What follows is based on my slide deck which I recently presented at the Olin School of Business at a Blockchain Panel (I will link up to video as soon as it becomes available)

Things are a little confusing out there I think in part because not enough care is taken in defining terms before assessing pros and cons. And when terms are defined, they sometimes include desired outcomes as a part of their definition. For example, blockchain is often described as consisting of (among other things) an immutable ledger. This is like defining a titanic to be an unsinkable ship.

So what do people mean when they bandy about the term blockchain ? I recently had a chance to learn about the project from a corporate perspective as represented by Ed Corno of IBM (see IBM Blockchain ), the other member of the panel I mentioned above. From Ed's slide deck we have the following definition:

Blockchain: a shared, replicated, permissioned ledger with consensus, provenance, immutability and finality.
Well, if this is what blockchain is, then maybe I want one too! The issue I have with this definition (apart from the fact that it confounds descriptive elements with desired outcomes) is that it glosses over what I consider to be an important defining characteristic of blockchain: the consensus mechanism. Loosely speaking, there are two ways to achieve consensus. One is reputation-based (trust) and the other is game-based (trustless).

I'm not 100% sure, but I believe the corporate versions of blockchain are likely to stick to the standard model of reputation-based accounting. In this case, the efficiency gains of "blockchain" boil down to the gains associated with making databases more synchronized across trading partners, more cryptographically secure, more visible, more complete, etc. In short, there is nothing revolutionary or radical going on here -- it's just the usual advancement of the technology and methods associated with the on-going problem of database management. Labeling the endeavor blockchain is alright, I guess. It certainly makes for good marketing!

On the other hand, game-based blockchains--like the one that power Bitcoin--are, in my view, potentially more revolutionary. But before I explain why I think this, I want to step back a bit and describe my bird's eye view of what's happening in this space.

A Database of Individual Action Histories

The type of information that concerns us here is not what one might label "knowledge," say, as in the recipe for a nuclear bomb. The information in question relates more to a set of events that have happened in the past, in particular, events relating to individual actions. Consider, for example, "David washed your car two days ago." This type of information is intrinsically useless in the sense that it is not usable in any productive manner. In addition to work histories like this, the same is true of customer service histories, delivery/receipt histories, credit histories, or any performance-related history. And yet, people value such information. It forms the bedrock of reputation and perhaps even of identity. As such, it is frequently used as a form of currency.

Why is intrinsically useless history of this form valued? A monetary theorist may tell you it's because of a lack of commitment or a lack of trust (see Evil is the Root of All Money ). If people could be relied upon to make good on their promises a priori , their track records would largely be irrelevant from an economic perspective. A good reputation is a form of capital. It is valued because it persuades creditors ( believers ) that more reputable agencies are more likely to make good on their promises. We keep our money in a bank not because we think bankers are angels, but because we believe the long-term franchise value of banking exceeds the short-run benefit a bank would derive from appropriating our funds. (Well, that's the theory, at least. Admittedly, it doesn't work perfectly.)

Note something important here. Because histories are just information, they can be created "out of thin air." And, indeed, this is the fundamental source of the problem: people have an incentive to fabricate or counterfeit individual histories (their own and perhaps those of others) for a personal gain that comes at the expense of the community. No society can thrive, let alone survive, if its members have to worry excessively about others taking credit for their own personal contributions to the broader community. I'm writing this blog post in part (well, perhaps mainly) because I'm hoping to get credit for it.

Since humans (like bankers) are not angels, what is wanted is an honest and immutable database of histories (defined over a set of actions that are relevant for the community in question). Its purpose is to eliminate false claims of sociable behavior (acts which are tantamount to counterfeiting currency). Imagine too eliminating the frustration of discordant records. How much time is wasted in trying to settle "he said/she said" claims inside and outside of law courts? The ultimate goal, of course, is to promote fair and efficient outcomes. We may not want something like this creepy Santa Claus technology , but something similar defined over a restricted domain for a given application would be nice.

Organizing History

Let e(t) denote a set of events, or actions (relevant to the community in question), performed by an individual at date t = 1,2,3,... An individual history at date t is denoted

h(t-1) = { e(t-1), e(t-2), ..., e(0) }, t = 1,2,3,...

Aggregating over individual events, we can let E(t) denote the set of individual actions at date t, and let H(t-1) denote the communal history, that is, the set of individual histories of people belonging to the community in question:

H(t-1) = { E(t-1), E(t-2), ... , E(0) }, t = 1,2,3,...

Observe that E(t) can be thought of as a "block" of information (relating to a set of actions taken by members of the community at date t). If this is so, then H(t-1) consists of time-stamped blocks of information connected in sequence to form a chain of blocks. In this sense, any database consisting of a complete history of (community-relevant) events can be thought of as a "blockchain."

Note that there are other ways of organizing history. For example, consider a cash-based economy where people are anonymous and let e(t) denote acquisitions of cash (if positive) or expenditures of cash (if negative). Then an individual's cash balances at the beginning of date t is given by h(t-1) = e(t-1) + e(t-2) + ... + e(0). This is the sense in which " money is memory ." Measuring a person's worth by how much money they have serves as a crude summary statistic of the net contributions they've made to society in the past (assuming they did not steal or counterfeit the money, of course). Another way to organize history is to specify h(t-1) = { e(t-1) }. This is the "what have you done for me lately?" model of remembering favors. The possibilities are endless. But an essential component of blockchain is that it contains a complete history of all community-relevant events. (We could perhaps generalize to truncated histories if data storage is a problem.)

Database Management Systems (DBMS) and the Read/Write Privilege

Alright then, suppose that a given community (consisting of people, different divisions within a firm, different firms in a supply chain, etc.) wants to manage a chained-block of histories H(t-1) over time. How is this to be done?

Along with a specification of what is to constitute the relevant information to be contained in the database, any DBMS will have to specify parameters restricting:

1. The Read Privilege (who, what, and how);
2. The Write Privilege (who, what, and how).

That is, who gets to gets to read and write history? Is the database to be completely open, like a public library? Or will some information be held in locked vaults, accessible only with permission? And if by permission, how is this to be granted? By a trusted person, by algorithm, or some other manner? Even more important is the question of who gets to write history. As I explained earlier, the possibility for manipulation along this dimension is immense. How to guard against to attempts to fabricate history?

Historically, in "small" communities (think traditional hunter-gatherer societies) this was accomplished more or less automatically. There are no strangers in a small, isolated village and communal monitoring is relatively easy. Brave deeds and foul acts alike, unobserved by some or even most, rapidly become common knowledge. This is true even of the small communities we belong to today (at work, in clubs, families, friends, etc.). Kocherlakota (1996) labels H(t-1) in this scenario "societal memory." I like to think of it as a virtual database of individual histories living in a distributed ledger of brains talking to each other in a P2P fashion, with additions to, and maintenance of, the shared history determined through a consensus mechanism. In this primitive DBMS, read and write privileges are largely open, the latter being subject to consensus. It all sounds so.. . blockchainy.

While the primitive "blockchain" described above works well enough for small societies, it doesn't scale very well. Today, the traditional local networks of human brains have been augmented (and to some extent replaced) by a local and global networks of computers capable of communicating over the Internet. Achieving rapid consensus in a large heterogeneous community characterized by a vast flows of information is a rather daunting task.

The "solution" to this problem has largely taken the form of proprietary databases with highly restricted read privileges managed by trusted entities who are delegated the write privilege. The double-spend problem for digital money, for example, is solved by delegating the record-keeping task to a bank, located within a banking system, performing debit/credit operations on a set of proprietary ledgers connected to a central hub (a clearing agency) typically managed by a central bank.

The Problem and the Blockchain Solution

Depending on your perspective, the system that has evolved to date is either (if you are born before 1980) a great improvement over how things operated when we were young, or (if you are born post 1980) a hopelessly tangled hodgepodge of networks that have trouble communicating with each other and are intolerably vulnerable to data breaches (see figure below, courtesy Ed Corno of IBM).


The solution to this present state of affairs is presented as blockchain (defined earlier) which Ed depicts in the following way,
Well sure, this looks like a more organized way to keep the books and clear up communication channels, though the details concerning how consensus is achieved in this system remain a little hazy to me. As I mentioned earlier, I'm guessing that it'll be based on some reputation-based mechanism. But if this is the case, then why can't we depict the solution in the following way?


That is, gather all the agents and agencies interacting with each other, forming them into a more organized community, but keep it based on the traditional client-server (or hub-and-spoke) model. In the center, we have the set of trusted "historians" (bankers, accountants, auditors, database managers, etc.) who are granted the write-privilege. Communications between members may be intermediated either by historians or take place in a P2P manner with the historians listening in. The database can consist of the chain-blocked sets of information (blockchain) H(t-1) described above. The parameters governing the read-privilege can be determined beforehand by the needs of the community. The database could be made completely open--which is equivalent to rendering it shared. And, of course, multiple copies of the database can be made as often as is deemed necessary.

The point I'm making is, if we're ultimately going to depend on reputation-based consensus mechanisms, then we need no new innovation (like blockchain) to organize a database. While I'm no expert in the field of database management, it seems to me that standard protocols, for example, in the form of SQL Server 2017 , can accommodate what is needed technologically and operationally (if anyone disagrees with me on this matter, please comment below).

Extending the Write Privilege: Game-Based Consensus

As explained above, extending the read-privilege is not a problem technologically. We are all free to publish our diaries online, creating a shared-distributed ledger of our innermost thoughts. Extending the write-privilege to unknown or untrusted parties, however, is an entirely different matter. Of course, this depends in part on the nature of the information to be stored. Wikipedia seems to work tolerably well. But its hard to use Wikipedia as currency. This is not the case with personal action histories. You don't want other people writing your diary!

Well, fine, so you don't trust "the Man." What then? One alternative is to game the write privilege. The idea is to replace the trusted historian with a set of delegates drawn from the community (a set potentially consisting of the entire community). Next, have these delegates play a validation/consensus game designed in such a way that the equilibrium (say, Nash or some other solution concept ) strategy profile chosen by each delegate at every date t = 1,2,3,... entails: (1) No tampering with recorded history H(t-1); and (2) Only true blocks E(t) are validated and appended to the ledger H(t-1).

What we have done here is replace one type of faith for another. Instead of having faith in mechanisms that rely on personal reputations, we must now trust that the mechanism governing non-cooperative play in the validation/consensus game will deliver a unique equilibrium outcome with the desired properties. I think this is in part what people mean when I hear them say "trust the math."

Well, trusting the math is one thing. Trusting in the outcome of a non-cooperative game is quite another matter. The relevant field in economics is called mechanism design . I'm not going to get into details here, but suffice it to say, it's not so straightforward designing mechanisms with sure-fire good properties. Ironically, mechanisms like Bitcoin will have to build up trust the old-fashioned way--through positive user experience (much the same way most of us trust our vehicles to function, even if we have little idea how an internal combustion engine works).

Of course, the same holds true for games based on reputational mechanisms. The difference is, I think, that non-cooperative consensus games are intrinsically more costly to operate than their reputational counterparts. The proof-of-work game played by Bitcoin miners, for example, is made intentionally costly (to prevent DDoS attacks ) even though validating the relevant transaction information is virtually costless if left in the hands of a trusted validator. And if a lack of transparency is the problem for trusted systems, this conceptually separate issue can be dealt with by extending the read-privilege communally.

Having said this, I think that depending on the circumstances and the application, the cost associated with a game-based consensus mechanism may be worth incurring. I think we have to remain agnostic on this matter for now and see how future developments unfold.

Blockchain: Powering DAOs

If Blockchain (with non-cooperative consensus) has a comparative advantage, where might it be? To me, the clear application is in supporting Decentralized Autonomous Organizations (DAOs). A DAO is basically a set of rules written as a computer program. Because it possesses no central authority or node, it can offer tailor-made "legal" systems unencumbered by prevailing laws and regulations, at least, insofar as transactions are limited to virtual fulfillments (e.g., debit/credit operations on a ledger).

Bitcoin is an example of a DAO, though the intermediaries that are associated with Bitcoin obviously are not. Ethereum is a platform that permits the construction of more sophisticated DAOs via the use of smart contracts . The comparative advantages of DAOs are that they permit: (1) a higher degree of anonymity; (2) permissionless access and use; and (3) commitment to contractual terms (smart contracts).

It's not immediately clear to me what value these comparative advantages have for registered businesses. There may be a role for legally compliant smart contracts (a tricky business for international transactions). But perhaps the potential is much more than I can presently imagine. Time will tell.

Link to my past posts on the subject of Bitcoin and Blockchain .

[Jan 21, 2018] Wells that they drilled last year will produce the biggest rates of decline, well over 50 percent. So, how many wells would need to be completed to increase production over a million barrels in 2018?

Jan 21, 2018 | peakoilbarrel.com

John x Ignored says: 01/18/2018 at 9:12 pm

Will be interesting to see US shale production in response to increasing frac hits, increasing costs, mounting debt wall. These are all legitimate issues which IEA seems to overlook when issuing rosy predictions. Three Stooges thought they could repair a hole in a pair of pants by cutting it out .same logic as IEA.
Guym x Ignored says: 01/19/2018 at 5:20 pm
Yeah, it's those items and more. The biggest they overlook is declines from production. The past two years, they have concentrated in sweet spots, to keep their chins above water. In doing so, they have miraculously brought production back up to 2015 highs, and not much more, although the EIA is reporting imaginary oil. Underneath all that production, wells are declining at a rapid rate. The biggest rates are what they drilled last year. Those wells will produce less than half of what they produced last year. So, how many wells would need to be completed to increase production over a million barrels in 2018? More than current capacity, that's for sure.
Dennis Coyne x Ignored says: 01/19/2018 at 6:40 pm
Hi Guym,

I agree.

Although tight oil output has increased at an annual rate of close to 1000 kb/d over the past 12 months (Dec 2016 to Nov 2017), I doubt that rate of increase will continue, probably about half that unless oil prices rise more than I expect (and I expect we might get to $85/b by Jan 2019).

Guym x Ignored says: 01/19/2018 at 7:48 pm
I'd say it's a crap shoot as to whether it goes up, or down with about the same number of completions in 2018 as 2017. Ok, let's say we have more completions, I still can't say it will go up 500k barrels. While people place statistics on depletion rates, I haven't seen a well, yet, that can comprehend statistics. As a matter of fact, they defy statistics.
There are 180k producing wells in Texas. There were about 5400 completions in 2017. That's about 3% of total producing wells.

[Jan 21, 2018] Possible Seneca cliff of oil production due to technological enhancements of extraction of oil from depleting fields. And first of all KSA

Notable quotes:
"... Major oil producing countries, Saudi Arabia chief among them, are using technology to stave off production declines. These YouTube videos are a perfect example of the extreme lengths being employed to continue production: ..."
"... When the decline kicks in, these technologies will ensure that the cliff will be steeper. While I believe we are living at the absolute peak of world production and that decline will kick in soon, I'm not so concerned about specific predictions. It will happen soon enough and when it does the impact will be severe. ..."
"... I think of this problem in personal terms -- my son was born in 2000. He will live to see a world of diminishing oil production (as well as sea level rise, resource conflicts, and many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today? I have lived through the peak period. I cannot envision what comes after. I can only hope that my son finds a way through it. ..."
"... "Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today?" ..."
"... Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I find interesting but useless to speculate about. ..."
"... I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al., were failing to materialize. ..."
Jan 19, 2018 | peakoilbarrel.com

x says: 01/19/2018 at 9:55 am

Ron is absolutely right about the creaming issue. Major oil producing countries, Saudi Arabia chief among them, are using technology to stave off production declines. These YouTube videos are a perfect example of the extreme lengths being employed to continue production:

These videos underscore how uniquely valuable oil is as an energy source and how no other substitute will ever come close to matching its utility.

When the decline kicks in, these technologies will ensure that the cliff will be steeper. While I believe we are living at the absolute peak of world production and that decline will kick in soon, I'm not so concerned about specific predictions. It will happen soon enough and when it does the impact will be severe.

I think of this problem in personal terms -- my son was born in 2000. He will live to see a world of diminishing oil production (as well as sea level rise, resource conflicts, and many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today? I have lived through the peak period. I cannot envision what comes after. I can only hope that my son finds a way through it.

Michael says: 01/19/2018 at 10:12 am

"Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today?"

Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I find interesting but useless to speculate about.

I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al., were failing to materialize.

This doesn't mean I think oil is infinite or anything. I do think our capacity to predict doom is much more circumscribed than our abilities to avoid it.

(I like the new editing feature on this site.)

[Jan 16, 2018] GOM oil and gas production in decline from now on

Jan 16, 2018 | peakoilbarrel.com

SouthLaGeo

x Ignored says: 01/12/2018 at 7:11 pm
Interesting BOEM report attached – their prediction of GOM oil and gas production from 2018-2027.
They predict oil production will increase from 1.65-1.67 mmbopd in the 2017-2019 window to 1.74-1.77 mmbopd in the 2023-2027 time frame. They include future production from current reserves, contingent resources and undiscovered resources. Contingent resources are mainly field expansion projects, new fault blocks, new reservoirs, and resources from discoveries that have not been put on production.
They have initial production from undiscovered resources occurring already in 2019 – suggesting that a few discoveries will be made and be on line by the end of 2019. Seems rather ambitious even for subsea tiebacks.
Given the lack of GOM exploration success in the last few years, my biggest challenge to these predictions are their estimates of production coming from new discoveries. They show about 1 BBO of production comes from currently undiscovered resources in this 10 year window.

https://www.boem.gov/BOEM-2017-082/

George Kaplan x Ignored says: 01/13/2018 at 3:14 am
SLG – hope you are well and had a good holidays. Here is my updated effort at the same thing. I've added some new discoveries, but not as big or developed as fast BOEM show. I've included all qualified fields as named entries except a few discovered in 2016 and 2017, and for a lot I've had to make guesses for reserves based on the expected development size (numbers in brackets show nameplate capacity). I might be able to improve things a bit when BOEM reserve numbers for end of 2016 come out, but it's still not going to look much like their estimates. It's noticeable that there's a lot of activity in short term, small tie backs now – but these only add about 5 to 10 kbpd and immediately start to decline. So like you I don't know where they are getting such high contingent resource production additions from unless it is all on existing developments – I guess if a lot of fields get to grow like Mars-Ursa has and Atlantis might this year then there'd be enough, but that seems unlikely to me, especially at the rate they show it.

SouthLaGeo x Ignored says: 01/13/2018 at 8:47 am
Thanks George, and same to you for the new year.
I've made a stab at comparing numerous production profiles for the 2018-2027 window – your's from above, my midcase and downside estimates from a little over a year ago, and BOEM's estimates – both their total estimate, and their total estimate minus any new resources/discoveries.
I plan to expand on this in a future post – including revised EUR estimate ranges.

George Kaplan x Ignored says: 01/13/2018 at 11:53 am
They are all models with something worthwhile to add to the discussion, which is not what I would say about the EIA projections. They just add have some kind of growth rate, with no basis in actual numbers, and make it look fancy by adding a hurricane effect – and yet this is the number usually quoted in the MSM. I think their predictions a couple of years ago had an exit rate for this year of 2.2 mmbpd – miles off, and when they do try to provide bottom up justification they look ridiculously ill informed.

Fernando Leanme x Ignored says: 01/15/2018 at 4:49 am
Maybe they have a higher oil price forecast? Or they don't bother to see if what gets put on line is worth developing? I know this is hard, but try preparing a forecast with prices increasing 3% per year above inflation for 30 years, and you will get a higher forecast.
Dennis Coyne x Ignored says: 01/15/2018 at 10:28 am
https://www.eia.gov/outlooks/aeo/data/browser/#/?id=12-AEO2017&region=0-0&cases=ref2017&start=2015&end=2030&f=A&linechart=ref2017-d120816a.3-12-AEO2017&sourcekey=0 \

The BOEM probably uses the EIA AEO 2017 reference price forecast.

[Jan 12, 2018] >When Your Bank Fails, Don't Walk Run!

Notable quotes:
"... or history. ..."
"... "Bail Outs." ..."
"... "Too Big to Fail," ..."
"... "Globally Active, Systemically Important, Financial Institutions" ..."
"... "unsecured creditors" ..."
"... "Good morning, Sir!," ..."
"... "would be glad to help me." ..."
"... "Today, you've come to the right place." ..."
"... "super-priority" ..."
"... Naked Capitalism ..."
"... before you may have your savings cash. ..."
"... "cross-border bank resolution." ..."
"... "Resolving Globally Active, Systemically Important, Financial Institutions." ..."
"... Financial Sense ..."
"... "about two days." ..."
"... Au Contraire ..."
"... "We expect to be cutting a lot out of Dodd-Frank," ..."
Jan 12, 2018 | dissidentvoice.org

by Brett Redmayne-Titley / January 11th, 2018

So. The US economy is just fine. The post-recession 2010 Dodd-Frank legislation has cured all. Banks have lots of cash. Congress is your friend and that certain-to-pass Tax Cut and Jobs bill will finally allow you, your family and America to MAGA.

Really?!

... ... ...

Oh, those evil banks! The shadowy corporatist denizens of New York, London, and Brussels, all guilty of a staggering set of every-expanding frauds couched in the beneficent language of greedy short-term materialistic gain. Financial "crimes of the decade," like the Savings and Loan meltdown, the Enron Collapse, and the Great Recession are nowadays reported almost monthly. With metered US justice amounting only to a monetary fine for the offending criminal bank – usually a small fraction of the money it previously stole, hypothecated, leveraged or manipulated – and with criminal prosecution no longer a possibility, these criminals continue to shovel trillions – not billions – into off-shore, non-tax paying accounts of the already uber-rich. There is never enough.

Just in time for Christmas, Americans received the "Tax Cut and Jobs Bill 2017" that, of course, contains not one word about jobs, but sounds so good to the ignorant who are still transfixed on the false mantra of MAGA.

LIBOR, FOREX, COMEX, which used high-speed program securities trading combined with insider manipulation, were the first serious examples of recent bank frauds. Since the Great Recession magically became the Great Recovery, Wachovia and HSBC banks plead guilty to laundering money for Mexican drug cartels, dictators, and terrorists. Wells Fargo and Bank of America were also guilty of defrauding 10's of thousands of homeowners of their properties during the "robo-signing" scandal; that was a scandal until Wells and BA paid the mortdita and all returned to business as usual. Example: In July 2017 it was revealed that more than 800,000 customers who had taken out car loans with Wells Fargo were charged for auto insurance they did not need. Barely a month later, Wells was forced to disclose that the number of bogus accounts that had been created was actually 3.5 million, a nearly 70 percent increase over the bank's initial estimate. Why not? When the predictable result will be a small percentage fine and keep the rest. Now that's MAGA!

If the individual retail – Mom and Pop – investor actually had a choice of where to put their cash money, then no one with better than a fifth-grade education would put a penny into the major stock markets. However, the goal of the many banking manipulations have had one goal: eliminate financial investment choices to one – stocks.

One choice, Gold and silver, the previous historical champion alternative in preserving one's wealth, was deliberately eliminated from short-term, private investment. The banks, issued and sold massive amounts of worthless certificate gold and derivative gold (not bullion), and the same in silver, at a current ratio of 272 paper instruments to one measly ounce of real physical gold. All this has been leveraged against real precious metals, and next used to influence the price of gold-down- by selling huge tranches of these ostensibly worthless gold contracts (1 contract=100 paper ounces) within seconds when the spot price of gold begins to rise. The banks have done this so often that gold has not risen to levels it would likely reach without this manipulation. This has driven massive liquidity that would have gone to precious metals towards stocks. This is likely evidenced by the advent of the meteoric rise in the price of BitCoin, one that-like gold- escapes the bank's control and a super-inflated stock market.

Similarly, thanks to the economic trickery that has been three rounds of Quantitative Easing, the other two conventional options; the bond market and personal bank savings accounts, have been manipulated to also produce a very low rate of return, driving these cash funds to stocks. It is this entire package of criminality – providing no other place for liquidity to go – that has performed as the plot to push a surging world stock market to obscene levels that have no basis in factually-based accounting or economic methods or history.

Banks Are Ready for the Next Crash – You're Not!

The banks know the next crash is coming. Like 2007, they have set in motion the next great(est) recession. Predator banks know that most people, thanks to the aforementioned financial control, media omission and an inferior education system, are "stupid," especially regarding the nuances of financial fraud. As the majority of Americans and Europeans live in the illusion that their financial institutions will protect their savings, they miss their bank's greedy preparations for the next stock market crash slithering through the halls of their Parliament or Congress. This already completed legislation states in plain English, and the language of endemic corruption, that your bank intends to steal your money directly from your savings account. And your government will let them do this to you.

30,000 pages make up the Dodd-Frank post-recession legislation, authored by the banks in the aftermath of the Great Recession. The Dodd-Frank legislation was touted as eliminating the massive bail-outs the US gave virtually every ill-defined too big to fail worldwide bank and US corporation in 2008-9. In reality, Dodd-Frank was as much a fraud against Americans as LIBOR or COMEX manipulation, et al .

Title II of the media-acclaimed 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act provides the Federal Deposit Insurance Corporation (FDIC) with new powers and methods to again guarantee – first and foremost – the massively leveraged derivatives trade once this massive leverage plummets as it did with AIG in 2007-09. However, that collapse was singular. The next will include all banking sectors.

The bank's paid-for politicians made sure a post-crash congress did not regulate derivatives via Dodd-Frank, and thereby encouraged a further increase in this financial casino betting, despite it being the root cause of the original problem. Thanks to Dodd-Frank and its predecessor, the 2005 Bankruptcy Act, Congress made sure these new fraudulent bets on stock market manipulation would surely be paid. But, not to worry; there would be no more "Bail Outs." Next time, these banks would use their depositors' savings, including yours. Meet: the "Bail-In."

Really?!

All Americans recall the massive "Bail-Outs" of 2007-9 and how their corporately controlled Federal Reserve Bank and an equally controlled US Congress threw several trillions of US taxpayer dollars at US banks, dozens of foreign banks, and any corporation with enough political pull to be defined as "Too Big To Fail" (TBTF). In the aftermath a year later, the banks understood that Americans and European citizens had lost enthusiasm for any future government Bail-Out, most preferring instead that any institution suffering self-inflicted financial duress should enjoy the fruits of their crimes next time, via the reality of formal bankruptcy proceedings.

The will or financial safety of the public is, of course, no concern to criminal corporations, and so easily circumvented via congress and the president. So, the banksters have redefined their criminality using two newly defined methods, both rebranded to be far more palatable to the public.

Currently, "Too Big to Fail," (TBTF) has a very fraudulent and elitist connotation just like, "Bail-Out." To millions across the world who have lost their homes, pension funds, retirement plans, and dreams, this decade-old moniker for financial oppression and fraud has now been conveniently re-branded. The bailed-out TBTF banks now have a far more magnificent definition: TBTFs are now, "Globally Active, Systemically Important, Financial Institutions" (G-SIFI).

This sounds so much better.

But, "Bail-Out"? No No. Would you not prefer a "Bail-In"? Not if you know the details. "Bail-Outs," may have also lost their flavour but in the new world of the G-SIFI, the next one is actually just a "Bail-In," away.

Yes, Bail-Ins, the new "systemically" correct term for publicly guaranteed bank fraud are already named as such in new national policies and laws, appearing in multiple countries. These finance laws, such as Dodd-Frank and its pending UK and European Union version, make upcoming Bail-Ins legal. These Bail-Ins allow failing G-SIFI banks to legally convert the funds of "unsecured creditors" (that's you) into bank capital (that's them). This includes "secured" creditors, like state and local government funds.

Really?!

With this in mind, I entered the main branch of Wells Fargo. The two checks in hand. On the way in I was greeted warmly, one after the other, by three more fresh-faced and eager proteges, all smartly uniformed to match the Wells décor, and who proffered, "Good morning, Sir!," again, and again and again. Certainly, these little fish were not in possession of authority enough to cash my mammoth checks, so I asked for bigger game, the Branch Manager.

Thus, I explained my plight to a very lovely lass who predicted she "would be glad to help me."

"Cheryl," patiently explained that I had come to the right place and she would be glad to cash both checks. Regarding my previous polite banking experience, she admitted that it was indeed bank policy to have limits on the availability of cash for withdrawals and that different branches had different limits. This was the main branch so my request here was meritorious. Further, she admitted that whatever daily cash coming into the branches in the form of deposits was not available for withdrawal, but was sent from the main branch for daily accounting at a central point common to all area Wells bank branches. Only a prescribed amount of cash was provided with each bank for daily customer cash withdrawals.

Really?!

"A couple of times your current request," was her cautious response to my question about her branch's limits on check cashing. Not to be put-off, I asked about a hypothetical US$25,000 check. She admitted this would be beyond her branches authority. "But," she smiled, "Today, you've come to the right place."

The financial law firm Davis Polk estimates the final length of Dodd-Frank, the single longest bill ever passed by the US government, is over 30,000 pages. Before passage, the six largest banks in the US spent $29.4 million lobbying Congress in 2010 and flooded Capitol Hill with about 3,000 lobbyists prior to Obama predictably signing its final unread version. No US congressman or senator had read it. But, the bank's congressional minions were told to vote for it. And dutifully they did.

The major cause of the upcoming financial meltdown, as with the pre-2008 conditions, is globally systemic gambling against national economies, called derivatives. Derivatives are sold as a kind of betting insurance for managing fraudulent banking profits and risk. So, why fix systemic banking fraud when the final result allowed these same banks to make even more money in the aftermath of the national and personal financial destruction they originated in the first recession?

Instead, thanks to Dodd-Frank, derivatives suddenly have "super-priority" status in any bankruptcy. The Bank for International Settlements quoted global OTC derivatives at $632 trillion as of December 2012. Naked Capitalism states that $230 trillion in worthless derivatives are on the books of US banks alone. Applied to Dodd-Frank this means that all these bad bank bets on derivatives will be paid-off first before you may have your savings cash. If there's actually any cash left once you get to the teller's counter.

Normally in a capital liquidation or bankruptcy proceeding, secured creditors such as a bank's personal depositors are paid off first because these are hard assets, not investments, and thus normally have a mandated priority. Under these new "Bail-In" Dodd-Frank mandates, your government has re-prioritized your bank's exposure and your cash deposit. Derivatives and other similar banking high-risk ventures are now more highly protected than bank depositor's savings. In the 2013 example of Cyprus, Germany and the ECB also made depositors inferior to other bank holdings leaving depositors with, after many months, a small fraction of their deposits.

And then came Greece.

Selling the lie while using the language of Dodd-Frank, we are told by media whores that banks will not be given taxpayer bailouts next time. True. The preamble to the Dodd-Frank Act claims "to protect the American taxpayer by ending bailouts." But how, then, to Bail-In the G-SIFIs without another taxpayer Bail-Out? No problem.

Enter the FDIC and another new banking term, "cross-border bank resolution." As the sole US agency required to pay back depositors who lose savings up to $250,000, FDIC is armed with a paltry US$25 billion war chest to pay depositors. Under Dodd-Frank, the FDIC will be the mechanism to replace deposits lost or squandered by bank fraud. The public, however, has an estimated total US cash deposits of US$7.36 trillion so, once the banks steal your savings, FDIC will be just a little bit short of funds. How to fix this mathematical shortfall? With, of course, more of your money via emergency taxes or a massive new round of Quantitative Easing (QE). Either way, by the time this happens your money is long gone. And it gets worse.

Really?!

Say, "Goodbye" to your Savings- Two Greedy Methods

It's [FDIC] already indicated that they will confiscate [savings] funds .

-- US congressman Ron Paul

On December 10, 2012, a joint strategy paper was drafted by the Bank of England (BOE) in conjunction with the Federal Deposit Insurance Corporation (FDIC) titled, "Resolving Globally Active, Systemically Important, Financial Institutions." Here the plot to steal depositor savings is clearly laid out.

The report's "Executive Summary" states:

the authorities in the United States (US) and the United Kingdom (UK) have been working together to develop resolution strategies These strategies have been designed to enable [financial institutions] to be resolved without threatening financial stability and without putting public funds at risk.

Sounds good until you read the fine print; i.e., whose risk are they actually protecting?

While claiming to protect taxpayers, Title II of Dodd-Frank gives the FDIC an enforcement arm, the Orderly Liquidation Authority (OLA) which is similar to its British counterpart the Prudent Regulation Authority (PRA). Both now have the authority to punish the personal depositors of failing banking institutions by arbitrarily making their savings deposits subordinate – actually tertiary – to bank claims for the replacement value of their derivatives. Before Dodd-Frank savings deposits were legally senior and primary to these same claims in a routine bankruptcy.

With the US banks holding only $7 trillion in personal cash savings deposits compared to $230 trillion is US derivative obligations, FDIC's $25 billion will not be enough. The creators of Dodd-Frank knew this before it was signed. As John Butler points out in an April 4, 2012, article in Financial Sense :

Do you see the sleight-of-hand at work here? Under the guise of protecting taxpayers, depositors are to be arbitrary, subordinated when in fact they are legally senior to those claims Remember, its stated purpose [Dodd-Frank] is to solve the problem namely the existence of insolvent TBTF institutions that were "highly leveraged with numerous and dispersed financial operations, extensive off-balance-sheet activities, and opaque financial statements.

Oh, but bank depositors can rest easy in the knowledge that replacing their savings will not come out of their pockets via another bank Bail-Out. Thanks to Dodd-Frank, the first line of defence will allow Congress to instead replace personal savings with a government paid for $7 trillion bail-in to FDIC to "replace" these savings.

But, that's the good choice.

Worse, Dodd-Frank gives new powers to FDIC and its OLA that allow an even more powerful and draconian resolution: any deposited funds in a bank, from $1 to $250,000 (the FDIC limit), and everything above, can instead be converted to bank stock! FDIC has provisions so this can be done, via OLA, quite literally overnight.

Really?!

An FDIC report released in 2012 ago reads:

An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositor's cash] into equity [or stock].

Additionally, per April 24, 2012 IMF report, conversion of bank debt to stock is an essential element of Bail-Ins included in Dodd-Frank.

The contribution of new capital will come from debt conversion and/or issuance of new equity, with an elimination or significant dilution of the pre-bail in shareholders. Some measures might be necessary to reduce the risk of a 'death spiral' in share prices.

Really?!

For affected depositors to retrieve the value of what was formerly the depositor's account balance, the stock must next be sold. When Lehman Brothers failed, unsecured creditors (depositors are now unsecured creditors) got eight cents on the dollar.

This type of conversion of deposits into equity already had another test-run during the bankruptcy reorganization of Bankia and four other Spanish banks in 2013. The conditions of a July 2012 Memorandum of Understanding resulted in over 1 million small depositors becoming stockholders in Bankia when they were sold without their permission -- "preferences" (preferred stock) in exchange for their missing deposits. Following the conversion, the preferences were converted into common stock originally valued at EU 2.0 per share, then further devalued to EU 0.1 after the March restructuring of Bankia.

Canada has also stated they are planning a similar "Bail-In" program. The Canadian government released a document titled the Economic Action Plan 2013 which says, "the Government proposes to implement a "Bail-In" regime for systemically important banks."

However, don't be getting cute by hiding your cash, precious metals, or passport in a bank safe deposit box. There are no longer safe either. Dodd-Frank took care of that, too.

Under Dodd-Frank the FDIC, using the auspices of Dept. of Homeland Security (DHS) can legally, without a warrant, enter the bank vault, have the manager secretly open any and/or all safe deposit boxes and inventory, or seize the contents. Further, if the manager is honest enough to inform the depositor of the illegal incursion he is subject to criminal charges and termination from bank employ. Independent reports reveal that all of America's safe deposit boxes have already been invaded and inventoried for future confiscation.

This already happened in Greece. Depositors who removed their jewellery or precious metals were met at the bank's door by security, a metal detector and confiscation.

Really?!

The power of the now remaining G-SIFI banks and FDIC was further evident when, cash finally in hand, I headed to my bank, JP Morgan Chase, right next door to Wells Fargo. The manager confirmed that the cash withdrawal policy at Chase was in keeping with that at Wells; very little cash available on demand. I posed a slight untruth and inquired as to what I should do about my upcoming need for $50,000 in hard cash. No, her bank would not do that on demand, but arrangements could be made to have the cash transferred to her bank. That would only take "about two days." Of course, I would need to fill out a few forms.

What a Difference a Congress Makes!

With the American and UK public again on the hook by law for the anticipated loss of the banks a distressed depositor might think the plot to defraud them now complete. Au Contraire .

In its rush to transfer further wealth upwards to off-shore bank accounts, US president Trump and his recently re-aligned republican bootlickers have left no stone unturned. First, Trump issued a memorandum that sets in motion his plan to scale back the provisions of Dodd-Frank and repeal the Fiduciary Rule.

It should be noted that the only voice of economic reason at the White House, Former Fed Chairman, Paul Volker, divorced himself from this growing scandal of basic mathematics very publicly. As head of Obama's recession inspired, President's Economic Recovery Advisory Board, Volker ran into the headwinds of fiscal insanity for too long, resigning in January of 2011 in disgust. His departure thus coincided with the renewal of the litany of criminal financial manipulation already discussed here. And now

The House approved legislation on February 2, 2017, to erase a number of core financial regulations put in place by the 2010 Dodd-Frank Act, as Republicans moved a step closer to delivering on their promises to eliminate rules that they claim have strangled small businesses and stagnated the economy. Said Trump:

I have so many people, friends of mine, with nice businesses, they can't borrow money, because the banks just won't let them borrow because of the rules and regulations and Dodd-Frank.

Poor banks!

Never mind, of course, that these poor banks are holding derivative exposure thirty-five times the total cash deposits of US savers nor that their ill-gotten riches – such as the UBS, Wells Fargo, Bank of America, RBS multi-billion dollar frauds – were taken off-calendar in Federal court for approximately 15% of the total crime. The banks kept the rest.

And they want more?!

"We expect to be cutting a lot out of Dodd-Frank," Trump said further defining the mantra of MAGA. This will likely see the deterioration of the newly created Financial Stability Oversight Council (FSOC) and the Consumer Financial Protection Bureau (CFPB) since these agencies curb further excessive risk-taking and the existence of too-big-to-fail institutions on Wall Street.

Well, depositors, your extreme caution is required. The wording of these new, bank-inspired sets of legislation is silently waiting to be used by many nations to prioritize banks before their citizen's. When the time comes, the race to the bank will be a short-lived event indeed.

With this in mind, I stepped into the bright sunshine outside the walls of JP Morgan/Chase bank, all but $100.00 of my day's take stuffed deep- and securely- in my pocket, its final outcome no one's business but my own.

However, for almost everyone else? Well when YOUR bank fails, don't walk, run! YOU do not want to be second in line.

Really!

Brett Redmayne-Titley is an Independent Journalist, Photographer/ World Citizen. He is a former columnist: PRESS TV/IRAN; writer and contributor to: Earth First! Journal; Zero Hedge; Veterans Today; Activist Post; Off-Guardian; Western Journalism; Intellihub; UK Progressive; Fars News Agency; Russia Insider; Mint Press News; State of the Nation; News of Globe; Blacklisted News; Before It's News; Common Dreams; Shift Frequency; etc

Read other articles by Brett .

This article was posted on Thursday, January 11th, 2018 at 8:01am and is filed under