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Waltzing at the Doomsday Ball

Written By: - Date published: 10:32 am, July 10th, 2010 - 51 comments
Categories: capitalism, class war, Environment - Tags: , ,

This guy writes what I would aspire to write if I had the time and the cojones. For a lazy Saturday morning rant, read on. — r0b

Waltzing at the Doomsday Ball

Capitalism is dead, but we still dance with the corpse

By Joe Bageant …

As an Anglo European white guy from a very long line of white guys, I want to thank all the brown, black, yellow and red people for a marvelous three-century joy ride. During the past 300 years of the industrial age, as Europeans, and later as Americans, we have managed to consume infinitely more than we ever produced, thanks to colonialism, crooked deals with despotic potentates and good old gunboats and grapeshot. Yes, we have lived, and still live, extravagant lifestyles far above the rest of you. And so, my sincere thanks to all of you folks around the world working in sweatshops, or living on two bucks a day, even though you sit on vast oil deposits. And to those outside my window here in Mexico this morning, the two guys pruning the retired gringo’s hedges with what look like pocket knives, I say, keep up the good work. It’s the world’s cheap labor guys like you — the black, brown and yellow folks who take it up the shorts — who make capitalism look like it actually works. So keep on humping. Remember: We’ve got predator drones.

After twelve generations of lavish living at the expense of the rest of the world, it is understandable that citizens of the so-called developed countries have come to consider it quite normal. In fact, Americans expect it to become plusher in the future, increasingly chocked with techno gadgetry, whiz bang processed foodstuffs, automobiles, entertainments, inordinately large living spaces — forever.

We’ve had plenty of encouragement, especially in recent times. Before our hyper monetized economy metastasized, things such as housing values went through the sky, and the cost of basics, food etc. went through the basement floor, compared to the rest of the world. The game got so cheap and fast that relative fundamental value went right out the window and hasn’t been seen since. For example, it would be very difficult to make Americans understand that a loaf of bread or a dozen eggs have more inherent value than an iPhone. Yet, at ground zero of human species economics, where the only currency is the calorie, that is still true.

Such is the triumph of the money economy that nothing can be valued by any other measure, despite that nobody knows what money is worth at all these days. This is due in part to the international finance jerk-off, in which the world’s governments print truckloads of worthless money, so they can loan it out. The idea here is that incoming repayment in some other, more valuable, currency will cover their own bad paper. In turn, the debtor nations print their own bogus money to repay the loans. So you have institutions loaning money they do not have to institutions unable to repay the loans. All this is based on the bullshit theory that tangible wealth is being created by the world’s financial institutions, through interest on the debt. Money making money.

As my friend, physicist and political activist George Salzman writes,

“Everyone in these ‘professional’ institutions dealing in money lives a fundamentally dishonest life. Never mind ‘regulating’ interest rates,” he says. “We must do away with interest, with the very idea of ‘money making money’. We must recognize that what is termed ‘Western Civilization’ is in fact an anti-civilization, a global social structure of death and destruction. However, the charade of ever-increasing debt can be kept up only as long as the public remains ignorant. Once ecological limits have been reached the capitalist political game is up.”

You can see why I love this guy.

Boomers and Doomers and XXL bloomers

… The doomers and the peak oilers gag, and they call it American denial. Personally, I think it is somewhat unfair to say that most Americans and Canadians are in denial. They simply don’t have fucking clue about what is really happening to them and their world. Everything they have been taught about working, money and “quality of life” constitutes the planet’s greatest problem — overshoot. Understanding this trashes our most basic assumptions, and requires a complete reversal in contemporary thought and practice about how we live in the world. When was the last time you saw any individual, much less an entire nation, do that? …

In heaven, there are no jobs

… The human economy is made up of three parts: nature, work and money. But since nobody would pay people like Allen Greenspan or Milton Friedman millions of dollars if they talked just like the rest of us, economists and academics refer to these three parts as the primary, secondary and tertiary economies.

Of these, nature — the world’s ecosystems and natural capital — is by far the most important. It comprises about three quarters of the total value of economic activity (Richard Costanza et al. 1997). To western world economists, nature — when it is even give nature a thought — is considered to be limitless. …

Say what you will about the tertiary “money economy,” but one thing is certain. It’s virulent. Right now finance makes up 42% of GDP, and is rising. Traditionally that figure has been around 9%. Fifty eight percent of the economy is “services.” When it comes to the service economy, most people think of fried chicken buckets and “customer service,” call centers harassing debtors or selling credit cards. However, much of the so-called service economy consists of “services” sub-corporations and entities owned and operated by monopolies in communications, electronic access and energy. They are designed for the sole purpose of robbing the people incrementally. Borrow a microscope and read the back side your cable and electric bill. Billing you is a “service” for which you pay. So is the guy who cuts off your lights if you don’t. And manufacturing? Ten percent. Mostly big ticket items such as salad shooters, as near as I can tell.

Monkey with the paper

… No matter what economists tell us abut getting the credit industry moving again, papering over debt with more debt will not pollinate our food crops when the last honeybee is dead. I suggest that we put the economists out there in the fields, hand-pollinating crops like they do in China. They seem to know all about the subject, and have placed a monetary value of $12 billion on the pollination accomplished by bees in the US. Can you imagine the fucking arrogance? All bees do is make our fruit and vegetable supply possible. Anyway, if we cannot use the economists for pollinators (odds are they are too damned whacked to do that job), we could also stuff them down the blowhole of the Deepwater Horizon spill. For the first time in history, economists would be visibly useful. …

It ain’t robbery, it’s a business cycle

… As the people’s wealth accumulates, it is steadily siphoned off by government and elite private forces. From time to time, it is openly plundered for their benefit by way of various bubbles, depressions or recessions and other forms of theft passed off as unavoidable acts of nature/god. These periodic raids and draw downs of the people’s wealth are attributed to “business cycles.” Past periodic raids and thefts are heralded as being proof of the rationale. “See folks, it comes and goes, so it’s a cycle!” Economic raids and busts become “market adjustments.” Public blackmail and plundering through bailouts become a “necessary rescue packages.” Giveaways to corporations under the guise of public works and creating employment become “stimulus.” The chief responsibility of economists is to name things in accordance with government and corporate interests. The function of the public is to acquire debt and maintain “consumer confidence.” When the public staggers to its feet again and manages to carry more debt, buy more poker chips on credit to play again, it’s called a recovery. They are back in the game. …

Does it hurt yet?

To anyone who is paying attention, things look doomed. Fortunately for American capitalism, nobody is paying attention. They never have. Even given the unemployment numbers, foreclosures and bankruptcies, most Americans are still not feeling enough pain yet to demand change. Not that they will. Demand change, I mean. We haven’t the slightest idea of any other options, outside those provided by the corporate managed state. So in a chorus well-schooled by the media the public demands “reform,” of the present system, the systemic pathogenic system based on exploitation of the many by the few, the one presently eating our society from the inside out. How do you reform that? …

Tick tock, tick tock. The wheel spins.

… The problem with the answer is that economy is now toxed out. Radioactive. Crawling with paper vermin and all manner of vermin, especially toxic derivatives — about $1.4 quadrillion worth (even as we are still trying to get used to hearing the term trillions), according to the Bank of National Settlements. That is 1,000 trillion, or $190,000 for every human being on the planet. There is not now, and never will be, enough wealth to cover that puppy — because there is not enough natural world under the puppy to create it. Not the way capitalism creates wealth.

Defenders of capitalism who say it can and must be saved must also admit that there is not enough money left to work with, to invest. There is only debt. Oh, yeah, we forgot; debt is wealth to a banker. Well then, all we gotta do is collect $190,000 per head from people in Sudan and Haiti and the rest of the planet. …

Under God, with fees and compound interest for all

From the outset, capitalism was always about the theft of the people’s sustenance. It was bound to lead to the ultimate theft — the final looting of the source of their sustenance — nature. Now that capitalism has eaten its own seed corn, the show is just about over, with the nastiest scenes yet to play out around water, carbon energy (or anything that expends energy), soil and oxygen. For the near future however, it will continue to play out around money.

As the economy slowly implodes, money will become more volatile stuff than it already is. The value and availability of money is sure to fluctuate wildly. Most people don’t have the luxury of escaping the money economy, so they will be held hostage and milked hard again by the same people who just drained them in the bailouts. As usual, the government will be right there to see that everybody plays by the rules. Those who have always benefited by capitalism’s rules will benefit more. That cadre of “money professionals” which holds captive the nation’s money supply, and runs things according to the rules of money, can never lose money. It writes the rules. And rewrites them when it suits the money elite’s interests. Capitalism, the Christian god, democracy, the Constitution.

It’s all one ball of wax, one set of rules in the American national psyche. Thus, the money masters behind the curtain will write The New Rules, the new tablets of supreme law, and call them Reform. There will be rejoicing that “the will of the people” has once again moved upon the land, and that the democracy’s scripture has once again been delivered by the unseen hand of God.

—————

Joe Bageant is the author of Deer Hunting with Jesus: Dispatches from America’s Class War. His newest book, Rainbow Pie: A Redneck Memoir, deals with America’s permanent white underclass, and how it was intentionally created. To be released in September in Australia and October in the United Kingdom. Rainbow Pie is available for preorder from Amazon-UK and Amazon-Canada. In Australia, the book can be pre-ordered at Scribe Publications.

51 comments on “Waltzing at the Doomsday Ball”

  1. RedLogix 1

    Thanks it’s been a while since I first came across Joe Baigent… I think I’ve even linked to some of his works few times before. He’s one of those authors who makes the rest of us look like well-meaning amateurs at best.

    The spectacle in the UK of banks who just 18 months ago got bailed out with hundreds of billions of taxpayer money; now demanding that govt deficits are as a direct consequence of that bailout, too high, and that the public sector must be hacked to shreds … is both macabre and instructive.

    The intriguing question to ask is just how much abuse from the elite capitalists will the ordinary people tolerate? Before they break out the pitchforks?

    • just saying 1.1

      Problem is they’ve got the pitchforms out and they are pointing them in the direction the government wants them pointed – beneficiaries, non-euros, the public service, the poor…….

      Maybe a largish opposition party could point out that any sense of grievance and indignation should be directed at the greedy parasites that caused the crash and continue to bleed us dry. Or are their knives pointed in that same direction….?

    • uke 1.2

      I think Joe underrates the moral culpability of the “ordinary people”.

      For example, “the Mum and Dad investor” puts money into some fund and collects the interest and returns, but without any corresponding responsibility for what use the money is put to and its various “externalities” (pollution, sweatshops, cancer, plundering of nature, oppression etc.). Isn’t this just as crazy as the rest of the system? Of course, most folks are wanting a little future security or a nest-egg, and aren’t slaves of greed like the elites of this world. And what other options do they have?

      Nonetheless, it is interesting that while all the pensioners who invested in BP shares are now seeing their incomes drop – and their consequent suffering is certainly tragic – neither they or the other owners of BP can be held personally responsible for what their personal investment has enabled and wrought. The nature of limited liability is that while you personally own the corporation and profits, you are legally protected from having to take ownership of the problems. The greatest risk taken is losing your investment.

      I think this more basic moral-legal disconnect is integral to our present and future difficulties. Maybe people can prove me wrong on this, but that’s how it looks to me.

      • ianmac 1.2.1

        Uke:Maybe the investment for the future retirement might be in a modest shelter and an integration in a small interdependent community, rather than in a large city.
        Maybe the perceived need for much money is to spend on the things that don’t really matter.
        Maybe we have been conned to think that access to plenty of funds is essential.
        Maybe the moral-legal disconnect will never be corrected unless we are confronted by massive collapse like total absence of oil?

        • uke 1.2.1.1

          Yes, you’re probably correct Ianmac. An absence of oil and such like will certainly clarify what things “really matter”.

          My fear – and it may be irrational – is that when the chips come down, widespread resentment over having certain “living standards” and “leisure activities” unavailable will lead to a further moral detachment. If a majority of Westerners can currently tolerate the obliteration of other societies who never attacked them, who knows what they will sanction in future?

          The “we are right and they are undeveloped and backwards” meme is very deeply coded into Western thinking.

      • Ag 1.2.2

        I think it is worse.

        The strategy of the capitalist parties has been to “create a nation of little capitalists” to borrow a phrase from our own Sid Holland. The usual way of doing this is to have policies that encourage home ownership. Among other things, this tends to weaken the welfare state, since the inverse relationship between home ownership and enthusiasm for public welfare is well established. So it goes a great deal deeper than investors in companies like BP. Every homeowner is an investor in Capitalism Ltd, whether they know it or not. Most people are so hopelessly inured to capitalism that they will never vote against a capitalist party.

        If you want to oppose this, you will have to create a nation of “little communists” by increasing citizens’ trust in the public sector to provide social security. That’s actually the easy part, since there will also have to be a massive bonfire of private wealth, to abolish “little capitalism”. This may occur either through a collapse of capitalism or be imposed on the public against their will. The former is preferable, but the latter may turn out to be necessary for environmental reasons (the cost of waiting may be too high for everyone).

        If you aren’t prepared to advocate that, then either go home or join the National Party. The faux leftism of joke parties like Labour is a waste of time, as is participation in democratic politics. Hopes of genuine reform lie elsewhere, if anywhere at all.

        • uke 1.2.2.1

          Ag,
          You may be interested in the leasehold land scheme that has been advocated by RedLogix on other threads. All land would be government owned, then leased out:

          Renters will pay for Nats’ tax cuts for the rich

          (See comment 6.1.1.1.1 down)

          This could be seen as less a form of pan-national “communism” – than a return to pre-capitalist modes of production in which everybody had a right to certain land holdings for cultivation in their local area, as well as access to “commons” of one kind or another. Ianmac’s comment about interdependent small communities also seems relevant.

          Such a set-up is not necessarily incompatible with the use of advanced technology, but it will have to be of a lighter and low-energy kind, with less infra-structure and services (education, medicine etc.) that are less “professionalised”.
          Cheers

    • Quoth the Raven 1.3

      Economic raids and busts become “market adjustments.’ Public blackmail and plundering through bailouts become a “necessary rescue packages.’ Giveaways to corporations under the guise of public works and creating employment become “stimulus.’

      Redlogix – You’ve argued here before that bank bailouts were necessary as with stimulus. Where does that put you?

      • RedLogix 1.3.1

        Necessary yes… as much as a torniquet may be necessary when an artery is severed, but scarcely desirable. Best to have avoided the crisis in the first place; especially when the crisis was the predicted consequence of decades of unregulated, unmoderated risk and greed. And while necessary the bailout was an insuffcient treatment by itself; it should have been accompanied by far more draconian financial industry regulation and consequences for the shareholders of those banks.

        Steven Keen has repeatedly pointed out, the $20T odd that was printed last year would have been far more effective if it had been directly used to repudiate the excessive amount of mortgage debt in the system. It would have both eliminated the root cause of the crisis and acted as a massive stimulus at the exact locus in the economy where it would be guaranteed to be spent. Instead by giving it all to the bankers it has largely been used to prop up their balance sheets (and annual bonus payouts) and thus been less effective than it might have otherwise been.

        • Quoth the Raven 1.3.1.1

          Necessary yes as much as a torniquet may be necessary when an artery is severed, but scarcely desirable. Best to have avoided the crisis in the first place; especially when the crisis was the predicted consequence of decades of unregulated, unmoderated risk and greed. And while necessary the bailout was an insuffcient treatment by itself; it should have been accompanied by far more draconian financial industry regulation and consequences for the shareholders of those banks.

          The financial markets the most regulated markets in history are ‘unregulated’? And why talk of unmoderated risk and consequences for the shareholders when you support bailouts that remove the consequences of that risk taking?

          And as Steven Keen has repeatedly pointed out, the $20T odd that was printed last year would have been far more effective if it had been directly used to repudiate the excessive amount of mortgage debt in the system.

          That’s not repudiating debt. This seems to me like reinflating a bubble. A bubble that must inevitably deflate.

          Instead by giving it all to the bankers it has largely been used to prop up their balance sheets (and annual bonus payouts) and thus been less effective than it might have otherwise been.

          That’s exactly what the central banks were doing before the crisis which created the credit bubble in the first place.

          • RedLogix 1.3.1.1.1

            Well QoR I guess from your perspective, even the most elementary, the most primitive of rules might well get defined as ‘over-regulated’… so I suspect that see any discussion along those lines as being unproductive. But here is a simple regulation that Keen suggested a while back:

            The historic annual rental to asset value for a house was about 15 times. In other words if the rental value was say $10k pa, then it’s asset price was $150k.

            Again historically we can see that LVR (Loan to Value Ratio) ratios of greater than 80% are imprudent.

            If the Reserve Bank simply combined these two observations into a new rule that prevented retail banks from lending more than (15 * 0.8) =12 times the annual imputed rental value of a property….all property bubbles would immediately cease.

            Now that is a simple, straightforward rule that could be implemented tommorrow with little pain if it was gradually phased in over a period of 8-10 years.

            Back in the 70’s when powerful unions appeared to threaten the possibility of wage price inflation, panicky capitalists imposed draconian rules on the unions….regulating them to within an inch of their lives. Yet the financiers have been allowed to drive massive asset price inflation over many decades…with absolute impunity.

            Regulation is not inherently a bad thing, it’s largely a question of who is writing the rules and in whose interests.

            • Quoth the Raven 1.3.1.1.1.1

              Finance markets are in terms of amount of regulation and oversight the most regulated markets in history. Therefore it simply defies reality for you to claim they are ‘unregulated’.

              As I’ve argued before regulation/deregulation in regards to the banking system is a red herring when it’s in the context of the fraudulent system of fractional reserve banking only made possible by the central banks.

              Here’s a simpler regulation which the Austrians otherwise ardent free market advocates argue in favour of and that is a 100% reserve rule.

              Back in the 70′s when powerful unions appeared to threaten the possibility of wage price inflation, panicky capitalists imposed draconian rules on the unions .regulating them to within an inch of their lives.

              So we’re in agreement that regulation of labour union activity is a bad thing.

              Yet the financiers have been allowed to drive massive asset price inflation over many decades with absolute impunity.

              Absolute impunity really you believe that?

              • RedLogix

                Finance markets are in terms of amount of regulation and oversight the most regulated markets in history.

                Sorry but you and I are on different planets here. It’s well documented elsewhere that in the aftermath of the 1930’s crisis the US Federal govt imposed a series of important regulations, the Glass-Steagall Act and the 1933 Securities Act among them…that essentially neutered the Wild-West economy of the previous decades, forcing banks into a narrow service sector role and preventing them from being speculators. A regime worked more or less ok until the 1980’s, when under Reagan’s administration industry lobbyists began a series of moves that progressively dismantled these provisions.

                The direct consequence of this de-regulation has been a series of increasingly dramatic ‘business cycles’ culiminating in the 2008 GFC. Historically the financial services industry comprises about 9% of GDP; by 2005 it was about 45% of GDP… an astounding distortion that is all you really need to know about what has gone so badly wrong in the Western world.

                The 100% Reserve Rule you link to is interesting, but would demand a massive re-jigging of the way the economy actually works. Banks actually have a vital role in the modern economy; they serve the essential function of creating the credit (M3 money) on which almost all transactions depend. The actual M0 money supply is only a tiny fraction of the total in circulation. Requiring them to hold a 100% reserve of M0 would require the central banks to print a truly massive amount of currency….most of which would be then sitting in bank vaults not circulating.

                I’d need more time to think it over, but my instinct is that from a money circuit theory point of view it’s not very sound.

                Absolute impunity really you believe that?

                OK so ‘absolute’ is probably rhetorical, especially given the events of the last few years, but compared to the way unions were stomped on…yes.

                PS. Another good robust Keen read.

                • Quoth the Raven

                  Sorry but you and I are on different planets here. It’s well documented elsewhere that in the aftermath of the 1930′s crisis the US Federal govt imposed a series of important regulations, the Glass-Steagall Act and the 1933 Securities Act among them that essentially neutered the Wild-West economy of the previous decades, forcing banks into a narrow service sector role and preventing them from being speculators. A regime worked more or less ok until the 1980′s, when under Reagan’s administration industry lobbyists began a series of moves that progressively dismantled these provisions.

                  You said financial markets are unregulated. That is simply an untrue statement and it is simply a statement of historical fact that financial markets are the most regulated in history. What limited financial deregulation that did occur occurred as much under Carter if not more than it did under Reagan. Reagan only repealed part of the Glass-Steagal act it was Clinton that did the rest nearly two decades later.

                  The direct consequence of this de-regulation has been a series of increasingly dramatic ‘business cycles’ culiminating in the 2008 GFC. Historically the financial services industry comprises about 9% of GDP; by 2005 it was about 45% of GDP an astounding distortion that is all you really need to know about what has gone so badly wrong in the Western world.

                  No, business cycles have been occurring for centuries. The current crisis is indeed severe, but business cycles haven’t increased in intensity from what I’ve seen in fact over the eighties and nineties it appears to be the opposite. As I said in another thread arguably the first trough in the business cycle occurred after the Napoleonic wars during which Britain suspended the convertibility of the pound to gold and inflated the supply of money to pay for the war. I hope you can see a pattern emerging here one that remains to today.

                  • RedLogix

                    You said financial markets are unregulated.

                    OK you win. The financial services market is highly and tightly regulated to within an inch of it’s life and all the failures of the finance industry (in this country for example) are the result of the state interfering with the magical operation of the pure market.

                    The current crisis is indeed severe, but business cycles haven’t increased in intensity from what I’ve seen in fact over the eighties and nineties it appears to be the opposite.

                    In my last comment I’ve added a link to another Keen paper. The direct answer to your question is on p45.

                    • Galeandra

                      And the winner is……RL

                    • Bored

                      Actually Galeandra, the winner of that marathon is nobody at all. They are arguing over the carcase of a system that has absolutely no chance of resuscitation. I did not jump in as banks and money and the state as we currently know it are past their use by date. The current models have a pathology that is inimical to the existence of our ecosystem. Even should we revive them any continuity will only result in another attempt to exploit our planet that will result in another systemic collapse. Thats Joes real message.

              • Pascal's bookie

                Here’s a simpler regulation which the Austrians otherwise ardent free market advocates argue in favour of and that is a 100% reserve rule.

                Wee question: Why say ‘simple’ instead of ‘massive’?

                The reason I ask is that you seem to think that the finance market is very heavily regulated, and that this is a bad thing. And yet you support a massive regulation like that. Such a reg would decrease the freedom to act, ie, would regulate much more behavior than what we have now.

                Using pharmaceutical regs as an example, let’s suppose three scenarios:

                1) Open slather, sell what you like, say what you like about it, buyer beware.
                2) Sell what you like, but it must be i) safe to a prescribed standard, and, ii)do what you claim it can do.
                3) All pharmaceuticals are banned.

                Clearly 1 is the least regulated, and three the most regulated. 2, however would have the most paperwork. You seem to be saying that therefore 2 is the most regulated, which is true in the sense that it will have the most number of regulations, but I’m not convinced that that’s a useful way of discussing which market would be the most regulated.

                • RedLogix

                  PB,

                  That’s the response I wish I’d thought of. In reading the old aphorism “For every complex problem there is a simple solution…. that is completely wrong.”…somehow popped into mind.

                  Perhaps complexity is always the natural consequence of balancing the competing demands of individual autonomy and social cohesion.

                  • Quoth the Raven

                    The quote you are looking for is “For every complex problem there is an answer that is clear, simple, and wrong.” from H. L. Mencken a fairly anti-statist thinker.

                    “I believe that all government is evil, and that trying to improve it is largely a waste of time.”
                    H. L. Mencken

                    • rainman

                      Here’s a crazy idea for you, QTR. It is possible to agree with one statement by a person without agreeing with all statements by that person.

                • Quoth the Raven

                  Pascal – Regulation is again a bit of a red herring here. The free market is self-regulating. Indeed a full reserve rule is severe, but it is exactly what would occur on the free market. When it is in the context of the fractional reserve system I do not want an unregulated open slather, because the fractional reserve system is clearly a bankrupt fraudulent system. In that regards Redlogix arguments are just the usual intellectual dishonesty from him. The whole financial services boondoggle is an outgrowth of state intervention in the economy.

                  • RedLogix

                    The free market is self-regulating.

                    And Hyman Minsky conclusively showed that this is a complete delusion. Try actually reading some of the Steven Keen papers I’ve linked to …or more of his material on his DebtWatch site.

                    The consequences of this ‘self-regulating’ fallacy are extremely important to grasp. In simple terms the ideas taught in most undergraduate economics classes is that markets when left alone always move towards a point of equilibrium…the intersection of the supply and demand curves. Virtually everything else is built on this intellectual foundation. As a result orthodox economics is largely blindsided by the dynamics of the real world. In the real world things change all the time…. yet for the most part the standard models simply treat these as side-show abberations from which the market will in the long-run recover from.

                    There is no sense in orthodox economics that the capitalist worker/business/banking system may in fact be inherently unstable and that the notion that markets tend toward equilibrium is entirely wrong. That’s why as an engineer, with a career in process control, I’ve usually found economics such an opaque, counter-intuitive subject to read. It wasn’t until I started reading Keen (who has good mathematical skills in standard engineering tools like differential equations) that the subject started making sense to me.

                    Keen’s big contribution is that he’s taken Minsky’s empirical observations…and properly modelled them using Circuit Money Theory and proper dymanic modelling techniques. And unlike most economists, he’s getting results that match reality. That’s why I keep referring to him so often.

                    Indeed a full reserve rule is severe, but it is exactly what would occur on the free market.

                    Fractional-Reserve Banking had fully emerged pretty much in the context of free markets by at least the early 1800’s…long before Central Banks became a feature on the scene, and well before any significant regulation of the market by govts.

                    Besides, as ZakC points out below BTW: the one thing the ‘Austrian’ perps never tell their advocates one or several of them appearing above is in what form the 100% reserve shall be held. Conflicts of interest are like that.

                    • Quoth the Raven

                      This is not about equilibrium nonsense. Yes, in the real world the market is constantly in flux, the market is constantly in disequilibrium. You’re arguing against a straw man again. This is the intellectual dishonesty I talk of.

                      “Circuit money theory” and “proper dynamic modelling techniques” sounds like more of the very same tendencies you criticise in orthodox economics. I think the insight of the Austrian school is that it’s not about vague theories and mathematical models but that it is praxeological that is it is about human action.

                      Yes, fractional reserve banking arose without significant central banking and there were bank runs and they would fail.

                    • RedLogix

                      The free market is self-regulating.

                      Yes, in the real world the market is constantly in flux, the market is constantly in disequilibrium.

                      Well from an engineering perspective (in the real world where I have to keep tanks from overflowing and boilers from exploding)…a process that is ‘constantly in disequilibrium’ cannot be, by definition, self-regulating.

                      “Circuit money theory’ and “proper dynamic modelling techniques’ sounds like more of the very same tendencies you criticise in orthodox economics.

                      Engineering transitioned into the modern era when it was able to properly model dynamics. I’ll use a simple example. In the classic era bridges were designed to stand up under the deadweight of their own mass and the intended maximum live load positioned statically at (usually) mid-span. You then added in a bit more strength for ‘safety factor’…and that was your design.

                      After a series of spectacular failures (the Tacoma Narrows bridge being the best known)… it was realised that this approach was inadequate. Loads were not static, they had to be modelled dynamically. The live load might not be a truck parked in mid-span…it was likely travelling at 100km/hr. The wind might not always act as a simple side load; it could create resonant oscillatory loads at specific speeds. Earthquakes could do entirely weird things to your reinforcing…and so on.

                      To handle these problems all modern engineers have to be able to do ‘differential equations’ and understand how to run dynamic numeric analysis in big computer models. It’s the language we understand. It delivers results in the real world, its’ why most modern things work most of the time.

                      By contrast, most standard orthodox economics is still firmly rooted in static, self-regulating or equilibrium thinking.

                      that it is praxeological that is it is about human action.

                      Oh you mean Behavioural Economics.

                    • loota

                      Free markets cannot be self-regulating if the actors within the market are not acting rationally. Or acting rationally but only with extreme short termism. Which was certainly the case in the lead up to the World Financial Crisis. Even years before these events Greenspan warned of the existence of “irrational exuberance’ in markets.

                      As for the level of regulation or not in the financial sector – Its true that specific areas of the financial markets are heavily regulated. But even then *enforcement* of that regulation was a completely different matter. (How is it that Madoff was not caught by the SEC for decades even when in recent years, other people were practically yelling at them that there was a huge Ponzi scheme going on there). Further, the large players in the financial markets figured out that the biggest profits would be made in specific areas with very little regulation. Collaterallized Debt Obligations and other esoteric derivatives for instance. Fueled by credit rating agencies able to give ‘assets’ which those tools based themselves on, completely fictitious (and unregulated) AAA credit worthiness ratings.

                      These large firms figured out how to make huge sums selling essentially worthless assets to people/organisations, then make even more money on driving the value of those assets down after they were bought.

                      It was win win. (For them, as long as they were on the right side of the bets).

                    • Quoth the Raven

                      Engineering is not economics. I could wax lyrical about the scieintifc field I work in, but it would be irrelevant. Economics is not a natural science.
                      Praxeology is not behavioural economics. A couple minutes reading would’ve informed you of that fact. Perhaps saying by saying constantly I was playing fast and lose with words. Disequillibria is a reality of the market. If it were in perfect equilibria there’d be little point in us discussing risk in the financial markets. The market is a process. By self-regulating I mean that humans through their choices regulate activity. The market is not some entity that floats above human endeavors getting out of control as some envisage it. We are the market. The choice we face is between freely cooperating individuals and the bottom up emergent order of the free market or the institutionalized violence and top down order imposed by the state.

                      The state cannot be self-regulating if the actors within the state are not acting rationally. Or acting rationally but only with extreme short termism. Which was certainly the case in the lead up to the World Financial Crisis.

                      Just change things around a bit and you have the same argument but different.

                    • RedLogix

                      It’s sad that everything gets so positional; when often it ain’t necessarily so:

                      For the record, my own approach to economics is a blend of Post Keynesianespecially Hyman MinskyComplexity/Econophysics/Evolutionary economics, and a very non-standard reading of Marx. I also have more time for the Austrian approach to economics than most members of the other heterodox schools, though my favourite Austrian is not Hayek or Mises but Schumpeter.

                      Keen

                      And while musing on Schumpeter I was amused to find this:

                      Although Schumpeter encouraged some young mathematical economists and was even the president of the Econometric Society (1940-41), Schumpeter was not a mathematician but rather an economist and tried instead to integrate sociological understanding into his economic theories. From current thought it has been argued that Schumpeter’s ideas on business cycles and economic development could not be captured in the mathematics of his day – they need the language of non-linear dynamical systems to be partially formalized.

                      Schumpeter

                      Which was more or less my contention above. And while I’m at Wiki:

                      Minsky’s model of the credit system, which he dubbed the “financial instability hypothesis” (FIH),[5] incorporated many ideas already circulated by John Stuart Mill, Alfred Marshall, Knut Wicksell and Irving Fisher.[6] “A fundamental characteristic of our economy,” Minsky wrote in 1974, “is that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles.”[7]

                      Disagreeing with many mainstream economists of the day, he argued that these swings, and the booms and busts that can accompany them, are inevitable in a so-called free market economy unless government steps in to control them, through regulation, central bank action and other tools. Such mechanisms did in fact come into existence in response to crises such as the Panic of 1907 and the Great Depression. Minsky opposed the deregulation that characterized the 1980s.

                      Minsky

                    • Quoth the Raven

                      My problem with you Red is that you often use the anti-capitalist rhetoric of some hardened marxist, but are in fact a political moderate and a capitalist yourself that’s why I goaded with my first comment.

                      I would expect a Keynesian like Keen to be more Schumpeterian given Schumpeter’s big business apologetics. I’ve read Keen’s criticism of the Labour theory of value (which is good) the demolition of which is one of the Austrian schools great contributions to economics and really undermines the whole marxian project which is something all too often not understood. It’s certainly something I didn’t understand for some years when under the woefully mistaken sway of marxism.

                      Disagreeing with many mainstream economists of the day, he argued that these swings, and the booms and busts that can accompany them, are inevitable in a so-called free market economy unless government steps in to control them, through regulation, central bank action and other tools. Such mechanisms did in fact come into existence in response to crises such as the Panic of 1907 and the Great Depression. Minsky opposed the deregulation that characterized the 1980s.

                      Th panic of 1907 was proceeded by the panic of 1921 and then 1929 and so on. Central banking has failed spectacularly in its original intentions. The criticisms of central banking that the Austrian school makes I think are sound and the predictive power of their business cycle theory has been proven time and time again even if they reject such predictions. Mises famously predicted the crash of 29 and had earlier refused a job in banking when Keynes lost his shirt and the current financial crisis was foreseen well in advance by the Austrians. The Keynesians were dead wrong in their predictions of the post world war II economy and the price of gold after the end of the gold standard and the seventies with its stagflation and high unemployment proved the bankruptcy of their policies.

                      I would say my economics is quasi-mutualist. That is accepting of a large amount of mutualist thought, but rejecting the pre-economic ideas like LTV that Austrian and classical economists have debunked.

      • Ari 1.3.2

        They’re necessary in the sense that routing the parasites can’t happen before you make sure you still have enough blood to keep going. 😛

  2. Jenny 2

    In light of the impending combined crises of, global financial collapse, climate change and peak oil, all building to a perfect storm, the same theme has been explored by a number of left writers, with as you indelicately put it the “cajones” and time for the job. Here in New Zealand our own Grant Morgan, makes in my opinion a worthy contribution to this debate in his essay the Beware the End is Nigh Grant Morgan’s well researched and thoughtful essay, is a must read dissecting the causes of the coming apocalypse but also attempts to present positive alternatives for avoiding the worst effects of the coming collapse.

    • Draco T Bastard 2.1

      Quoting Article:

      On 18 September 2008, US Federal Reserve chair Ben Bernanke40 and US Treasury secretary Henry Paulson41 made an emergency dash to Capitol Hill. There they told senior politicians that the United States and other major economies were just “days away from a complete meltdown of our financial system’. Lawmakers at the heart of the world’s most powerful empire were left stunned.42

      But central bankers knew what they had to do: bail out the financiers. Since September 2008, in the greatest orgy of debt creation in history, central bankers have pumped countless hundreds of billions of dollars into the financial sectors of America, China, Europe and elsewhere.43

      “The first rule of central banking,’ says US economist James K. Galbraith44, is that “when the ship starts to sink, central bankers must bail like hell.’45

      What the Great Bailout means is a global transfer of liabilities from private financiers to central banks on an unprecedented scale. A breathing space has been won by shifting the problem.

      The problem, of course, still exists and that problem is capitalism.

  3. Draco T Bastard 3

    Ah, an essay written by someone else who “gets it”. The capitalist socio-economic system uses up the worlds resources as fast as possible to make a few very well off and everyone else far worse off. This has always been the case and we always seem to go back to using the same failed system after each societal collapse.

  4. ianmac 4

    Those who trade in money are admired by many. They build very expensive houses and smile benignly at the peasants and say, “You must not be jealous of us rich folk. We are superior because we work hard and it is really your own fault if you are not one of us. Get over it. Get off the benefit and do real work like I have.” John smiles modestly.

    Salsman: “Everyone in these ‘professional’ institutions dealing in money lives a fundamentally dishonest life. Never mind ‘regulating’ interest rates,’ he says. “We must do away with interest, with the very idea of ‘money making money’.

  5. ianmac 5

    Does the essay indicate the reason why we are told that growth must increase each year by 3+% ?
    Does it explain why we must have a population growth each year of 4+%?
    As a rank amateur I do not understand why these two things are essential.

    At some point ultimately it must reach an endpoint when it will be said we have reached saturation and must stop, wouldn’t we/they?.

    • durr 5.1

      the right don’t care about the future tho, as long as they make money in their lifetime, they’re happy

    • Draco T Bastard 5.2

      No, it doesn’t but the one that Jenny linked to does. Capitalism is a ponzi scheme.

      • ianmac 5.2.1

        Thanks Jenny and Draco. A huge amount to absorb.
        Even if Obama wanted to change the direction I suspect that he couldn’t.
        Even if the Left really set out to change in NZ I think that it would be an up-hill battle against the tide of popular opinion. (Piss of you lot. I just want me beer, me smokes and reality TV. Conserve? In my back yard? Piss off!)
        And for a simple soul who cannot change the world one would feel powerless.
        But lets be optimistic!

        • prism 5.2.1.1

          I think you should get out in the sun Ianmac and enjoy. Don’t give up on the possibility of improvement, my son is listening to South Park which sends up everything. Perhaps this would help to lighten the day.

          • prism 5.2.1.1.1

            Just caught Flanders and Swan on Nat Radio requests. I like the bit where they sing that the columbine can’t marry because they are incompatible – one binds to the right and one binds to the left. There is a message here. Sounds deep and meaningful somehow.

    • Ari 5.3

      Because we’ve keyed the economy to relying on growth- both of the population and of the economy itself. Not having growth means investment only yields returns for businesses that perform above average- truly a terrifying prospect. 😉

  6. Cnr Joe 6

    We diddle whilst Home burns (sic).
    What times we are in and there is nothing to be done but to live them, right?

    captcha – actual

  7. ZakC 7

    allow me recall a visit to Chch one time.. in the cathedral.. for a talk by a visiting African bishop.. whose topic included debt and receiving special mention the debt of debts.. yes, as he termed it the interest on the interest that debtor countries could not meet in the first place..

    come question time.. and after the jubilee2000 people (I think they were sponsors) had their go to the applause of many present, an older guy got up to ask his question.. a little deaf as I recall.. in missing or overlooking or not hearing instructions to go to a centrally placed mic.. he approached the two bishops out front.. until calls had gotten loud enough and their two faces pale enough at this ‘behavior’ to register.. at which he turned.. walked slowly back to the mic and asked if the Bishop knew what the interest had become on principal loans.. not the compound interest(to be clear).. the obvious thought to me at least being how that was the money African nations had to get rubbed out to stop attracting compounders etc..

    The bishop smiled and then said he did not know, that he was a man of God and not an accountant!

    Years later happenstance I came upon the older guy – a kiwi – who told me he had not been appalled at the response as such, but at the bishop’s mentioning debt issues in the first place. If he did not know what or of what he was talking about.. etc..

    Go figure, guys.

    BTW: the one thing the ‘Austrian’ perps never tell their advocates – one or several of them appearing above – is in what form the 100% reserve shall be held. Conflicts of interest are like that.

  8. prism 8

    Zak C – I remember the difficulty that one African country had in trying to cope with the western capitalist system and deal with its own internal problems. The banking system had withdrawn from services in the country. When the country wanted to deal with the banks it had to physically transfer the money in suitcases to a nearby branch in another country. The finance minister or responsible official went off with a suitcase full of currency and was discovered living in Paris.

  9. john 9

    American, privatized, corporatized f…k the people Neo-Liberal Disaster Zone (The same system Nact and Rodney Hide slavishly follow as they can’t think of anything else,makes them richer!)is in collapse.Don’t believe me listen to an American Link:

    Why do we follow such a selfish, divisive greedy ponzi scheme that just makes the rich richer so they can look down on us? That’s what the rich do in America to the poor schmucks there!

    • Bored 9.1

      I wonder how the rich in the Hamptons for summer will get on when the climate gets too hot, the growth economy collapses, energy gets short and money cant buy food. Unlike African peasants they dont have a clue how to even grow a radish. Who then will be “wealthy”?

    • john 9.2

      http://tinyurl.com/25vnfwg
      Another Link showing the destructiveness of the Corporatization, privatization neo-liberal disaster in America which Nact slavishly follows: where making a profit for your shareholders and rising stock market valuations count while you make that money by exporting all your manufacturing to China and your ex-workers go on food stamps and die off early because health insurance is a for profit business for the employed and well-off not for others. This system has been looked up to as a model for us ever since the Roger (Roger the economy) Rogernomic days of the early 80s.That we still have a reasonable civilised decent society is courtesy of our mixed economy lite soccialism we had in the 50s and 60s,which has not yet been totally destroyed,though Wodney is working on that believe it!

  10. Bingo 10

    What a depressing post.

    I think I will kill myself

  11. Jenny 11

    Reading of the End Times of Capitalism, makes me fear that we may be facing, “The Mind-Rending Horror of….. The Atheist Apocalypse”

  12. r0b,

    All you need is to be disgusted, cynical and totally over what anybody thinks about you and of course you need a modicum of creative ability and the need to express how you feel to write like Joe.

    Having a good sense of black humour also helps I think and knowing your subject as in your average white trash angry Americans.

    I’m sure there are enough angry white trash Kiwi’s here too judging by the fact that no matter how detrimental National is to New Zealand more and more angry people seem to want them to stay in power. Sort of like: If we can’t have whatever the hell we want, nobody will.

    I’m currently waiting for a link with an interview Joe gave to Prof. Kevin Barret who is one of our most if somewhat controversial prominent 911 truth activists. Maybe that helps in the get pissed department. LOL

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