I’m old enough to remember an America that wasn’t too far from the 1960s. One of my childhood best friends had a mother who was a “hippy” in a classic sense, dressing like a “flower-child” deep into the 1980s. Basically, her sartorial sense was frozen in the second half of the 1960s, when she was at university. She was no longer with my friend’s father, who suffered from post-traumatic stress due to his experiences in Vietnam.* The late 1960s and early 1970s really had a huge impact on my friend’s life.
The people who went through the 1960s as young adults, the Baby Boomers, experienced something that transformed our culture. 1964 was closer to 1944 in many ways than it was to 1968. In Manson: The Life and Times of Charles Manson the author argues that one of the reasons that the sociopathic cult leader was able to flourish in Southern California during this period is that people had no expectations of a future anything like the past. People expected literally anything to happen. No matter how crazy.
Since the late 1960s, we really haven’t seen anything similar in terms of cultural tumult. The period between 2015 and 2020, for example, isn’t that shattering. On the other hand, I wonder if in some ways 2015 will be seen as a watershed. That was certainly the year many of us started to be worried and confused about what was going on in this country.
But the reason I’m posting this is to ask older readers who remember the 1960s: does this feel similar in any way? Clearly there is a contrast, in that the late 1960s was filled with hope, and the early 2020s not so much.
* Strange note, many years later when I lived in Berkeley, California, at the other end of the country, I ran into my childhood friend’s half-brother, who was a computer science graduate student at Cal. He had a very distinctive last name, when he told me where he had grown up I realized who he was.
Obs thinks today’s troubles are caused by an alliance of convenience between The Plutocracy and Cultural Marxism. Unlikely but true, like the USA and USSR during WW II. Cultural Marxism wants to destroy society. The Plutocracy wants to rule it. Cultural Marxism weakens it, making it easier to rule. Eventually, the two will fall out because ultimately they want two different things, but right now they support each other.
He is wrong.
It is actually The Illuminati that are running society. They caused the repeal of Glass-Steagall (but have cleverly covered their tracks, as they always do). The weakening of society has been caused by alien agents from a solar system far away. Once earth society has weakened sufficiently, they will push the Illuminati aside and take over.
Obs,
Productivity increases – which is another way of saying real growth – are available to almost every country today with very few exceptions (North Korea, sub-Saharan African countries, etc.). Why develop applied technology when you can always borrow it?
And you don’t need access to resources.
The only part of your comment here that I agree with is the necessity for a population capable enough of running a modern society. But that’s a low bar. Pretty much every major region outside of sub-Saharan Africa meets that standard today, and perhaps at some point in the future even SSA will meet it. That’s because the populations that are not capable of inventing technology are still capable of borrowing and applying it productively.
What makes the United States of the mid-20th-century so special is that its productivity picked up without much in the way of borrowing. Before that era, the U.S. was already the most productive major economy in the world, and it only picked up steam. Then in the nineteen-seventies it started to slow down again. Productivity growth continued, but at a much slower pace.
You’re still not understanding.
Productivity grew faster for the U.S. in that period than it did in any other comparable period over the last eighty years. But that’s me comparing the United States to the United States.
I wasn’t comparing the U.S. to anyone else.
But productivity also grew rapidly in other countries and regions during the same period. There was a global productivity boom after WW2. Western Europe, and most specifically West Germany, saw its productivity increase even more rapidly in that era than did the United States.
Why? Because almost all of Europe was starting from a lower productive base than the U.S. was in 1945, and those countries could also borrow all the productive applied technology that the U.S. was putting to use during that era.
And it wasn’t just Europe. The Third World at that time (outside of China, SSA and few other places) also saw a productivity boom, and it also ended at the same time the U.S. productivity boom tailed off.
Matt,
No problem. I’m not disgruntled or exasperated. That’s just the way I write.
Inequality is a hot topic, and it’s an important one, but it’s not really what I was talking about.
International comparisons of inequality are difficult to make when some countries, like the U.S., are continental in size and highly varied in demography, while others, like Sweden and even Japan, are smaller and more homogenous.
Another problem with cross-country comparisons is that often the trends we see nationally are matched by international trends. And in this case, that’s true. The U.S. productivity boom from 1945 to 1973 was also a global productivity boom. Americans were driving it, but a lot of other people participated in it. And when it ended for us, it also largely ended for them.
I also know that the high-productive economic period between 1945 and 1973 in the U.S. saw the bottom quintile’s income growth match the top quintile’s income growth.
That may not reduce a pre-existing inequality, but it sure prevents it from growing larger. Poverty rates in the U.S. during that period were also reduced by half, something we haven’t seen since.
Please keep in mind that I’m speaking of “income growth” and not “relative incomes” or “wealth.”
I’m not sure what to make of this paragraph. Higher income declines have seen stronger income gains?
I do believe that large-scale low-end immigration is keeping U.S. poverty rates higher than they should be (i.e., the U.S. is importing poverty) and also depressing the wages among American workers who do not have a high school degree, which is approximately the bottom decile of the working population.
@Roger: I know it is convenient to make it look like an insane conspiracy theory and I also know that there are “explanations” out there which go too far.
But that those “going too far” being picked up by the mainstream media and ridiculed is just part of the propaganda coup around it.
Its not even a “conspiracy theory”, because there are documented relations, meetings, organisations and even institutions which build the bridges.
And some of the most hyocritical “politically correct” in a very Cultural Marxist sense people I ever saw were top management men of big corporations. Man do they take this crap serious in meetings and their business. The second most important thing after profits and their salary, so they can sick people out while still “doing good”. Even Goldman-Sachs is on board and foundations like the Rockefeller pumping millions into projects and propaganda.
Hillary Clinton was the Wallstreet’s candidate more than Trump for god’s sake!
Look even at her “official” supporters and how she talked about the common people when she was among her peers and clientele!
And thats not just her, she learned it from her husband and Obama played cool and nice, but what did he do?
He was more asocial and more of a warmonger than Trump, he just had the mainstream media on his side!
But if its about social engineering in the Cultural Marxist way, for cutting down conservative values and ruining autochthonous communities and demography, they all were so fond of “leftism”.
But at Wallstreet they all stopped and just blinked with their eyes. How comes?
Or look at the Team of Obama: Directly from the pillars of the Plutocracy. Almost all important positions.
And someone like Bush on the other side did zero against the advance of Cultural Marxism and the destruction of the domestic people, or did he?
The staff in the background stay largely the same throughout the presidencies. Some faces might change, but they come from the same nest. You can prefer to ignore those facts and trust a system which betrayed the people, the voters again and again. Your choice. Your vote. I can’t vote in the United States anyway. 🙂
@ Obs: That’s what THEY would want you to say.
@Pincher: The issue even with productivity is: How do you achieve it? Were the people in the USA of the 1940’s so different from those 10 years before? It was the lack of money supply which led to the Great Depression after the bubble busted or was busted and with the money and demands from around the world the US working bench could cultivate its full potential – with huge investments too.
We now know which potential e.g. most East Asian populations have, but what they needed is, among other things, a boost, investments on a big scale to level up. Its not about free Capitalism, its not about individual culture, its about capable people getting the instruments they need to develop themselves.
If you lack capability or investment, worse both, you can’t flourish. Innovations and leadership are the brain, productivity and discipline are the muscles, resources go to the guts but the money is the blood of a developed economy. If the bloodstream doesn’t flow, everything else will crumble. That’s why the Financial Oligarchy is the ruling class. It can make people dance or stop the dance in a second. E.g. if the FED really goes up with the interest rate, they can plunge the US and world economy in a major recession. Trump was absolutely right about that and if they try, he has to fight, but of course he doesn’t want that, so he makes deals and hopes they stay calm.
Just as an example of how the bankers can lift the economy (though they are close to their limits right now!) or push it down and taking the risk. Which might be too dangerous to do even for them, because the money system is so vulnerable latest since 2008, that, even if they wanted to stop the crash at some point, they might no longer be able to. So this is a major risk to take if they want to take out a politician, what they most likely won’t, because Trump makes compromises too and delivers here and there as well. But to me the latest “interest rate debate” was a clear threat and fight.
“Experts think its good for the economy” – let me laugh. A huge portion of the economy is just barely breathing just because interest rates are so low. If they would rise the crash is imho inevitable.
Obs,
We know the basics pretty well. Businesses and governments use inputs more efficiently. They get more out of less. Continually.
To do that…
Education helps to a degree.
Infrastructure helps to a degree.
More efficient use of capital is necessary.
But the most important component to productivity growth seems to be labor- and energy-saving technologies that private businesses apply to the production of goods and services.
How important is productivity? Here is how one random source I found online put it best: “Rising productivity is the main driver of long-run economic growth and productivity growth is perhaps the single most important indicator of an economy’s health—it drives real incomes, inflation, interest rates, profits and stock prices.”
That’s true wealth. If you think something else is the measure of true wealth (like gold, oil, access to resources, the number of multinationals in your city, etc.), then you have it wrong.
No, but if banks are leery about lending you money even when they have money to lend and even when you have a great idea, then how can you be more productive in supplying a good or service? And that is basically what happened during the Great Depression after the bank runs in the early thirties were finished. The system froze.
But those financial crises don’t last. If anything, the world today has a glut of capital – too much money is chasing too few good ideas. And you don’t have to be in America or Europe or Japan or China to have access to that money.
What most of East Asia lacked until after WW2 were stability and openness.
Stability is obvious. If your country isn’t politically stable, you won’t be able to have a growing economy. And of course China wasn’t stable for over a century, from the Opium Wars to the end of the Chinese Civil War in 1949, whereupon it then engaged in a dumb three-decade experiment with Maoist economics.
Second, you need openness. If you are going to borrow someone’s technology, you need to be open to learning about it, open about seeing how it fits in to production, and open to buying and selling globally. This takes time. And some people never take to it. (Look at North Korea.) But once the various parts of East Asia stabilized and plugged in to borrowing Western technology, they quickly got into the game.
There are serious problems with our financial system, but I don’t think you hit on them at all.
@Pincher: It’s not that I disagree with anything you said, you’re obviously pointing out valid assumptions, but you underestimate, by far, the financial aspect. If you write:
“But those financial crises don’t last.”
Yes, they are supposed to come to a halt, in theory. But the main issue is credit, and credit is just trust. And having a non-completely globalised economy had the big advantage that not all nations were affected the same in the past and some could recover from those still standing.
Now imagine the end of a financial bubble cycle on a truly global scale and with no institutions in full control of the financial system when it bursts. That will be ugly.
If we would have still the old 19th century financial system, the United States would be long broke. That they are not relates to the dominant political and financial position, as well as dollar trade. As long as the currency being respected and traded on a high level, the USA can expand the money supply and balance it out. Like helicopter Bernanke said.
You keep your economy alive by flooding it with cheap money, because you want to prevent the interest rate cycle to end. Its the interest rates which cause the regular bubbles to expand and burst.
But by keeping it low, the financial money by far exceeds the real economic values (surplus money) until “the rich profiteurs” of that cycle don’t even know where to put it to prevent decaying of their fortune.
They invest, or let investment funds do it, into crap papers, useless start ups and especially real estate and foreign countries valuables.
China too does shopping with dollars worldwide, you never know how long it works out.
Usury is the root cause of the problem. At some point only with lowest rates people and business can pay their bills, because of accumulated debts.
The financial system should just supply the markets and economy with sufficient liquidity, they should never become such a central, powerful position in society and must be kept under check.
That’s why the Greeks had regular debt reliefs and premodern European kings preferred to lend from Jews which they could disposess of their titles if necessary. You always need a back up plan to devaluate tge debts.
The modern method is a currency reform. But thanks to “international law” and aggressive lawyers, mainly from the US, that path is blocked too.
The USA themselves are caught in this cycle, but because of the digitised, virtual economy and their power, they just expand on.
But if you lift interest rates and reduce the money supply now, regardless of other economic factors, the debt burden would be unbearable. The crash inevitable.
So the money expansion goes on in an unprecedent way and there are two questions left:
How long is that even possible in the virtual economy? Is there a hard limit or not?
If there is a crash, who will use it in which way?
Because don’t think all people suffered from the great depression. Some knew what’s coming, redistributed their capital and influenced the timing of the crash.
Then too the whole market collapsed when credits got more expensive.
This time it would be a big political turn, a major turning point. Sure some make at least back up plans or they come up with a currency reform in time. No idea, but the current situation defies classic financial rules of the past.
@ Obs (February 11, 2020 at 12:15 pm) : No doubt there are lots of well-off people, full of Joseph Bottum’s “spiritual anxiety”, who have swallowed tall tales of The Patriarchy and All-Encompassing White Privilege. They then try to expiate their sins by doing social justice warrior stuff. But they are not part of some Cultural Marxist/Plutocracy conspiracy. Of course, The Patriarchy and All-Encompassing White Privilege are very similar conspiracy theoriesiiio9iiii.
@Roger: You don’t even need a big sinister conspiracy for explaining why two parties with something in common match together for common goals and against common enemies.
Obviously the e.g. Rockefellers want no true Socialism and getting disposessed, but they also want to export their model to the rest of the world and their potential enemies in and outside of the United States under control.
In the 1960’s latest this alliance was formed and its a non-aggression pact between the Plutocracy and the left-moderate leadership.
That doesnt mean they love each other, that doesnt mean they can’t fight each other, but by and large they cooperated and transformed Western societies to this Neoliberal, pluralistic and politically correct system which combined Capitalist political and economic with Cultural Marxist societal and cultural dominance.
One of those parties alone would have never achieved that, because both were hated by the majority of people at that time for good.
So this transformation had to happen slowly, step by step and with the general public being manipulated.
Take for example the immigration as an important factor. The Plutocracy wanted mass immigration and female labour to disrupt the naturally grown communities and get more and cheaper human resources for the system.
Now the left side favoured the immigration and a Capitalist optimised Feminism without considerations, even though its against the interests of their classic working class clientele, including, actually and especially, Afro-Americans.
The right would have argued somewhat against, but doing nothing substantial. In the end, the so called (Neo-) Conservatives just demanded tax cuts and cutting the social system back. So that the average egoist Euro-American could calm down with the idea of “at least I’m not paying taxes for them and these leftist projects”.
So two things the Plutocracy and their Neoliberal agents achieved:
– Mass immigration and female labour
– tax and social cuts, less political control (e.g. Glass-Steagall act), both to their benefit
Looking at Democrats and Republicans in the last decades, both did the same thing. Reps more cuts, market Liberalisation and social pushing, Dems more immigration, Feminism and Cultural Marxist reeducation. But the difference is slight overall and in combination those two just work for the same structural transformation.
Obs: I used to not understand what you were saying. Now I think I do and it’s as wrongheaded as Susan Brownmiller’s rape is “a conscious process of intimidation by which all men keep all women in a state of fear.”
Step one: postulate some fuzzy entity, The Patriarcy, The Plutocracy.
Step two: argue that X, Y, and Z benefit this entity.
Step three: triumphantly declare that the entity deliberately caused X, Y, and Z.
Usually, if you have near infinite financial means and don’t want to expose yourself, like the Plutocracy, you don’t create something new, but you use, direct and corrupt whats already there.
Or do you really think Wallstreet and the Oligarchy spend hundreds of millions for “Socialists” which might hurt their power and wealth? They buy them.
Also, the Plutocracy as I mean it is no coherent unity per se, but rather a social class with huge accumulated wealth and possessing direct instruments to excel political and economic power, like the control of major media channels, bank institutes, investment funds, big corporations, influential foundations etc.
Quite often they come from the same background, go to the same schools, meet in the same clubs and intermarry with each other, some even forming clans and dynasties in the classic sense of the word.
In any case they exert disproportal, politically rather uncontrolled power and influence on society.
That doesnt mean these people are one block, or they share all the same opinion on everything. Actually there are even some thinking more like me probably.
But the dominant stream, the majority follows the path and program I described. And those who don’t are under pressure, because the current paradigm is so aggressive and deeply entrenched with the muzzle of political correctness, that they are themselves afraid of exposing themselves.
While those in the alliance can lean back and just use their money and tools to support those politicians they prefer.
Like Hillary Clinton, which was their darling and some might even have speculated that with Trump as the opponent, her election would have been a sure thing.
The Plutocracy did not invent Cultural Marxism, but it chose it being, in a castrated form, the best leftist ideology to live with, because it actually makes some transitions they wanted too easier and can be used to protect themselves from more direct and aggressive political attacks on them and their power base. Like the anti-trust campaign against Standard Oil/Rockefellers.
Not that this was a serious hit, but rather a populist Wink for the electorate, but still. The anti-Rockefeller campaigns showed whats possible, even in Capitalist America.
And campaigns against them and their power base is the last thing they want. Rather they prefer attacks on average middle class white males, which did revolt more than once against their plans.
The brutal cynism is they use those beaten up by them and the left as a scapegoat for “general social injustice”. Cant get lower than that, but is quite effective.
Obs,
Nations today are not all affected the same way by economic downturns. Nor did financial downturns in the past contain themselves to host countries. The Great Depression was global. So were all the panics going back at least to The Panic of 1857.
Go to Wikipedia and read the first three paragraphs on the Panic of 1873 and you’ll see how quickly financial contagions spread through the global economy of the 19th century when financial credit and trust were built on the gold standard.
I’m all for increased nationalism, but your ideas on economics and finance are just wrong. There’s simply no way for modern countries to isolate themselves economically from the rest of the world. There never has been.
The rest of your post is a scattershot of vulgar economic ideas that street corner vagabonds indulge in. You seem unhappy with a lot of the modern world, but not focused in your understanding of it.
@Pincher: The 1870’s are a good example of how different nations were caught at different times, in different economic segments and differing intensity. So yes, global in a way, but not all were affected the same way and to the same degree. At the basis of the 1873 Krach too was an investment bubble with cheap money and a lot of fraudsters. It was peculiar insofar as in the shadow of the railway and construction boom among others a very high criminal energy on all levels developed, rather primitive in comparison to the criminal and half-criminal or at least detrimental networks which exist now. Anyway, a different story…
As for increased nationalism, there are always two ways to get the control for the people back:
– national rules
– international rules
But what is key is that there have to be rules, regulations, systemic reforms in the interest of the people as the economy develops too. As it is, inter- and transnational rules completely failed to care for the interest of the common people. Transnational policy making is even more corrupt than national policies are. This is evident in all larger scale multinational organisations. They are easier to corrupt, harder to control and prone to follow their own dynamic with little to no accountability of the executing organs. This is true for almost all international organisations, though one of the reasons might be that they are US-British dominated, but not just, its inherent since there is no transnational watchdog for controlling them.
“The rest of your post is a scattershot of vulgar economic ideas that street corner vagabonds indulge in. You seem unhappy with a lot of the modern world, but not focused in your understanding of it.”
That is your perspective and since you are just using a derogative phrase, I can’t answer to any of your valid or invalid criticism of what I wrote above.
But I know for sure that you shouldn’t dismiss it easily, just because you might not like it or heard it before and didn’t like it then. That the money is at the centre of the modern Western Capitalist system should be evident. Better inform yourself about the history and mode of operation of the current money and banking system.
When people speak of “modernity” in that context, they have to define what they mean first. Because I refuse to accept the Leftist/Liberal definition of “modernity”. I absolutely embrace modernity, just not the destructive form Liberalism and Marxism imposed on us these days. To me modernity in a positive sense would mean efficiency, rationality and true human progress in an aspiration for the greater good and higher standards, while overcoming superstitious, outworn bonds. Neither the orthodox economics (factually falsified by now), the current oligarchy and financial system, nor the Frankfurt School’s Cultural Marxism (factually falsified by now) and politial correctness represent anything like that. These are meanders which led “modernity” in the wrong direction to put it mildly. They threaten modernity, as does the “pluralistic society” they propose, which might just result in either a new Feudal Age for the Plutocracy or/and religious frenzy.
Obs,
Could the flows of modern capital be better regulated? Sure. Would I regulate it in any way that I’ve seen you write about so far? No.
Different nations were NOT caught at different times in the 1870s. The panic was global, not local. It wasn’t any different than it is today, except that the ripples took months to be fully felt in distant markets instead of weeks.
The world is far wealthier today than it was in the 19th century because it’s far more productive. And I certainly would rather live with the financial markets of the last thirty years than I would those used in the U.S. from 1870 to 1900.
No one has ever figured out how to avoid financial panics and economic recessions, and I doubt anyone ever will. The people who before 2007 thought that the Fed had conquered the business cycle were obviously wrong.
But that mistake still doesn’t negate the excellent record from the end of 1982 to the end of 2007 in which the U.S. experienced only two mild recessions that lasted a total of just sixteen months. That’s twenty-five years of almost uninterrupted prosperity, including one of the most prosperous decades in American history (the nineteen-nineties).
Do you think you could do better? Because you can’t.
@Pincher: Of course the gold/silver standards and 19th century financial markets were not better at all. And yes, the USA and the West in general were doing fine superficially in the time frame you name. BUT the big problem is, that 2008 was no accident insofar, as the Liberalisation of the financial markets which sped up with the Clinton administration led to an even faster growing speculative bubble and money expansion than it would have happened otherwise. That way they could and still can go on, but this just shows that the market mechanisms of the past don’t work any more and that we are in big trouble because the correction has to come at some point. You can’t produce 10, 20 or 100 times the financial virtual money of the real values your economy has. And I’m not even speaking about the US markets alone, the global markets are supersaturated as well.
And you can’t get out of that with completely nuts and deregulated derivative markets. What happened 2008 and what was written about it in the mainstream media is just the tip of the iceberg.
Obviously I’m not the financial expert to come up with a perfect, better money system model and you won’t be the guy who does is neither, but if people us and actually anybody with a minimum intelligence and the will to inform himself can realise how bad and rigged the current financial system is, there has to be something done. I’m speaking of a more fundamental change than just fully re-installing the Glass-Steagall act, though I would support that too.
Some cornerstones of a fundamental reform are not exactly rocket science as well, because you can see, if digging into it, that the basic structures of the banking sector date back to the early modern times and didn’t have changed that much up to the 19th century, actually up to now. Its a completely outdated organisational structure which never worked as it should have for the nations and people since the “national” banks of Sweden and England were founded.
Fractional reserve and investment banking, as it being run today, is just a catastrophy. Especially if there is no strong state which can keep up with those institutions and control, if necessary punish them for wrongdoings in a sufficient way.
Instead, the money controls the Western states and demands political action as they wish. That’s a complete fallacy, a wag the dog scenario.
There are different more fundamental reform approaches out there, and I have to confess I don’t find them completely convincing by now, but one thing is for sure, you need a strong and independent political leadership which holds the strings tight and won’t allow the money sector to define what’s right and wrong and where the nation has to go. If the banking sector makes your state’s rules, it doesn’t help whether you have a more national or international economic policy, it will go wrong. The best rules you could apply won’t work if the power is not with a strong & independent political leadership legitimated by the people but a small group of oligarchs which define and bend the rules as they wish, for their benefit only. But that’s the case now.
Obs,
You keep saying “can’t” when I think you mean “shouldn’t.”
Because clearly we are able to extend this kind of financial credit for extended periods of time without it having a negative effect on the economy. We still grow. Investment still happens. We still produce.
And according to one theory, we will for the foreseeable future have an excess of financial capital in the global financial markets if the Chinese savings rate continues to exceed 30 percent of national income.
That money has to go somewhere. It’s going to be invested in something, whether it is empty buildings in China or more U.S. dollars in China’s reserves or Chinese investment in the U.S. property market. Or whatever.
And it’s not just China.
The consequences of this are that 1) global interest rates are low, 2) borrowing is easy 3) imbalances between countries are high, 4) the capital stock is high and so capital expenditure is low, and 5) developed countries often now borrow from developing countries, which almost never happened in the past.
Welcome to the New World. If you don’t like it, I suggest you tell the East Asians to start consuming more and saving less.
East Asians in this context primarily means Chinese and those use their state controlled financial system for dumping prices and keeping up a higher living standard than there nominal income would suggest.
They just keep the trade and financial flow alive for their sales and influence in the West.
Also, like said, they go shopping and buy resources around the world.
Its all based on the dollar monopoly and the political position of the USA. Which was even more dominant under Bretton woods, which led us back to the “golden times” of US dominance after WW2.
In fact the world is paying for the US military and Globalisation of the Plutocracy and get nothing but greenbacks in exchange.
Even if it works out for the American-Capitalist Oligarchy long enough until their system change is too advanced to be stopped peacefully any more, it should not be indeed.
Like I said before we don’t know where the hard limit for such a virtual money expansion in the digital economy is, but my assessment is that there is no fix limit, but the system will get more volatile with every growth and in the end even a small incidence might cause the dollar bubble to burst. But when this happens and whether it will be a “controlled blasting” like on black friday will be seen.
But surely the “financial elite” must have a back up plan, or otherwise they are more stupid than they should be, which would be good and bad at the same time.
Concerning reform: I don’t fully agree on fundamental methods, but I would definitely propose the nationalisation of the central bank, the stricter control of fractionised banking and the introduction of a state bank for the private sector, as well as the end of the current government bond system. But thats nothing which can be done in a hurry and for sure not by a weak government. Its a longer term goal.
Short term its necessary to cut full banking and the derivative market back, bringing the big investment funds under control and regulated.
Basically, nothing of that is possible with the current mainstream politicians or before the crisis is already there, like so often. And if someone tries before, this might even cause the burst and he gets the blame, even though its about already existing systemic failure.
Obs et al. on the questions of current coordinated/chaotic forces: I link here an essay that makes intriguing stab at rejiggering concepts, introducing refreshing new taxonomic schema. Concludes with a gesture toward some sort of solution to the ongoing predicament.
http://bnarchives.yorku.ca/606/
“The Autocatalytic Sprawl of Pseudorational Mastery”
Obs,
No, it’s the opposite. All else equal, a high savings rate lowers the present standard of living. One gives up consumption for investment, which one hopes will lead to a higher standard of living in the future.
That’s just Econ 101. It’s not complicated.
But what if there are no good investments to be had? What if there is too much money chasing too few good investments?
Now it gets a little tricky. Ben Bernanke, who was then Chairman of the Federal Reserve, speculated in 2005 about something that others would later call a “global saving glut.” In Bernanke’s opinion, there was too much cash out there and not enough good investments. Governments, corporations, and people (but not ordinary Americans) were hoarding cash because they saw nothing worth investing in.
Bernanke’s speculation is not settled among economists. Some dispute it. But his thesis certainly fits with a lot of what of I’ve seen in both the U.S. and world economies over the last fifteen years, a period in which I was both working in East Asia (Taiwan) and investing in the California property markets.
With so much cash in the system, people were looking for just about anywhere to park their money. Banks were giving away funds – in large part because China was giving away money built up by its incredibly high savings rate – and ordinary investors were putting those monies into assets that carried only a highly speculative return. In other words, those assets were generating no present-day income. So these investors were speculating that there was a greater fool out there somewhere.
Higher up the investment food chain, there was another phenomenon. Corporations were hoarding cash. Take Apple, for example. Why does it have $245 billion in cash presently on its books? That’s an absurd amount of cash to hold for a public company that ought to be deploying its assets in the most productive ways. Cash is rarely productive for a company. In theory, Apple’s corporate managers ought to either spend down some of that cash in ways they believe will enhance their company’s value or they should send that cash to their company shareholders. Apple did neither.
And it’s not just Apple. U.S. Corporations are flush with cash, but they are not investing. One might argue that these businesses are expecting a big downturn and want to temporarily build up their cash reserves to weather the storm. But this situation has been going on for many years.
Keep in mind, too, that businesses are typically borrowers, not savers. And in this low-interest-rate environment, borrowing makes a lot of sense. When banks give money away, businesses and people usually line up to take it. But only American consumers seem to still follow this rational action in today’s world.
*****
So the Chinese are lowering their standard of living with their high savings rate. In fact, many economists believe that China would do itself (and the world) a lot of good by consuming more and saving less.
What is better for China right now? More foreign-denominated bonds, which it already has plenty of and which aren’t that great an investment anyway? (China buys that debt to control the worth of its currency vis a vs the dollar for trade reasons.) Or a higher standard of living by consuming more domestically?
And yet economic volatility is lower now than it has ever been in American history. That’s true even when we take into account that the U.S. (and the world) just suffered in 2007-2009 the worst economic downturn since the Great Depression.
I’ll take the economic volatility of the last forty years over the volatility of the 19th- and early 20th-century financial systems any day of the week.
The problem, as I keep trying to tell you, is not volatility. It’s PRODUCTIVITY!
@asymptotalitarian: That’s an interesting read, thanks for sharing!
Not that much the author writes was completely new to me, but he summed it up quite nicely. I have positive and negative comments on the text.
– The positive: I particularly liked how he described the vicious circle of “autocatalytic” money-credit expansion, the problem of persisting differential accumulation and dynamics inherent in systems, like the bureaucracy and capitalisation.
Without knowing the basics of our current money system, which being perfectly outlined with references to Heinsohn, any serious debate about the current economic system is worthless.
– The negative: The “autonomy” being reduced at some point to individualist and even Cultural Marxist values and slogans. When Martin writes: “The usual way to do this seems to be to say that power struggles are an inherent part of human nature.”
This sounds as if it isn’t like that. Later he writes, correctly on p. 19, that this is not right because of cooperation taking place between individuals and even totally Capitalist corporations wouldn’t function otherwise. But still individuals and groups compete and its natural. Nations are not just “imagined communities”, but based, at least ethnic nations, on physical and cultural realities.
That it humans can overcome competition doesn’t falsify the behavioural tendency in principle, because nature is not just symbolic, but a given reality we can recognise or ignore, but not change. There is a reality beyond symbolism.
So some parts seem to be too much Marxist/Cultural Marxist influenced. Not wrong per se, but with a tone I found, somewhat, irritating.
Especially when the basic outlook is too mechanistic and leaves any actor-centred approach behind: Systems running amok. Yes they do, there are tendencies within systems, systemic failures. But there are also agents, people and groups of people acting rational or irrational, having different interests and plans. If an analysis ignores that or plays it down, makes it a second level nuisance and not a creative power, its problematic.
Nationalism too is not just irrational, not even against transnational order, but against THE transnational (read Capitalist-Oligarchic) order many people from left and right don’t want. So this sentence makes no sense, from p. 22-23:
“Other attempts to build a system of transnational institutions are continuously marred by resistance and protests, including calls to national authorities to take back what has already been contracted out. There were protests against attempts to create transnational institutions, such as CETA and the TTIP; in THE AUTOCATALYTIC SPRAWL OF PSEUDORATIONAL MASTERY the 2010s we saw Occupy; before that, there was a series of G8 summit protests; in the 1990s, there was action against MAI. ”
Primarily because of the content and direction they were going, not because of the treaties and institutions as such! This is misleading, because it describes a reaction as simply nationalist and irrational which was directed against very specific aspects of the transnational mode of cooperation.
So this is the real issue: “Without a legitimatebureaucratic organizational foundation, the transnationalization process may well undermine itself in the long run.”
The solutions proposed are naive at best, not completely off in every respect, but like it was shining trough before, I see a lack of acceptance for the human condition. Some models are doable with a selected elite of motivated people for a limited period of time, but never with all individuals, not even of the more capable populations, and never on the long run.
The bureaucracy failed for a variety of reasons, so did the autonomy project AND capitalisation. All three are necessary, all three failed and must be balanced out.
So a slow but still inspiring start, a great middle part based on the basics of the modern Capitalist society (one of the best summaries I read – concise and on the point – but a too naive-leftist ending, even though with inspirational power nevertheless.
@Pincher: “In Bernanke’s opinion, there was too much cash out there and not enough good investments. Governments, corporations, and people (but not ordinary Americans) were hoarding cash because they saw nothing worth investing in.”
That’s the wrong assumption for the vast majority of people. The true reason for most but the superrich is insecurity. If you don’t know whether you can pay your next mortgage rate, electricity bill or food, you don’t by a 4th pair of shoes and the bigger TV you want. Especially if you feel your current job and income being threatened by a rather “pessimistic” outlook on society and economy. So its about disposable capital and expectations. Not nothing around you. And its the same for the Chinese, many still don’t trust the “good weather” and they increase their wealth and consumption even without having to use all their savings (so far). So its a positive trend nevertheless – for them and so far.
“Keep in mind, too, that businesses are typically borrowers, not savers. And in this low-interest-rate environment, borrowing makes a lot of sense. When banks give money away, businesses and people usually line up to take it. But only American consumers seem to still follow this rational action in today’s world.”
No, they are not. They still believe in their system while nobody else does for good. They live on the nod without realising it. In 2008 the system showed its weakness, so clearly, that nobody with a minimum knowledge and intelligence can ignore it any more.
And you miss the political rationale, the Chinese know the US Oligarchy is pissed off because THEY did not crumble. But by buying the US bonds up, they have the dollar bubble in their hands. So if the USA would ever try to punch them in the face, they have to for an all in, because they would make it burst!
There are some dooomsday sect groups among Christians, Jews and others alike in the USA, but beside those, most want to live on and want to see their children alive, so even hardcore power gamblers might think twice whether that would be worth it.
So I totally get that the big corporations are saving in the USA, but the problem is: If they are saving in dollars for the most part, they are still sitting on the wrong train. But that will make it easier for the Financial Oligarchy to buy them out once the crash is there if the system survives it. Like in the 1920’s and 1930’s, when a lot of corporations and commodities changed its proprietor.
Only banks can create money, even new money after a currency reform, as long as they are allowed to. Apple not – or do they have a safe bank in the meantime?
“So the Chinese are lowering their standard of living with their high savings rate. In fact, many economists believe that China would do itself (and the world) a lot of good by consuming more and saving less.”
No, they doing the US a big favour in return for their growth and learning curve. They are supplying the US economy with cheap goods and buying bonds and saving dollars. That way they are taking a lot of the superfluous dollars from the market. Imagine they would go shopping unrestrained, can you imagine where the dollar inflation would be?
They will do that if:
– They believe the dollar bubble will burst any moment anyway and their restraint won’t make a difference any more
or
– They want to crash the USA because the American Oligarchy started a serious attack.
“And yet economic volatility is lower now than it has ever been in American history. That’s true even when we take into account that the U.S. (and the world) just suffered in 2007-2009 the worst economic downturn since the Great Depression.”
And it could be only prevented because of tools not available to the bankers of the past which, in fact, could make the “old style banking” which is the power base of the Plutocracy superfluous to say it mildly, but being now abused to keep them in the saddle as long as possible to go on with their structural transition of the occidental – and the whole world.
But if the other big players, under politial pressure, wouldn’t play the game, it would be over and its still at risk. Do you realise that the 1929 crash might be a like a walk in the park in comparison to the dollar bubble bursting?
I’m talking of a real logjam and my great-grandparents and grandparents could at least use their country residence when they lost their savings. What do you think todays people will do? Even most on the countryside can’t supply themselves if the economic flow comes to a halt.
And you deal with people which were ready to rise the interest rate to unbearable levels to blackmail Trump! They were ready to go for it for such a petty game?! Really?
There are psychopathic, greedy and blood thirsty gamblers around with way too much power. Even Trump is a careful choirboy in comparison.
“The problem, as I keep trying to tell you, is not volatility. It’s PRODUCTIVITY!”
Not any more. That ship has sailed for the USA long time ago. Its Europe and China, as well as the control of the resources and especially oil market which keeps the dollar bubble alive. In Europe its the US alliance with Britain (now gone from the EU) and the control over Germany (seems to be stable right now) which keeps it going. Without Germany the whole game would have collapsed long time ago.
If one of those pillars breaks away, its gone. If the current leadership or financial Capitalists make one serious mistake, its gone. Its all on the edge and the global market data is going down right now (just read some today, look very bad).
Like I wrote at the start of this debate, even something like the Corona virus might make a difference. Its especially tricky for the US-Chinese relationship which is now central for the whole world system. If one side shows a serious weakness first, the other might profit from it. The American side might speculate on that. Because even if you look very bad yourself, if the main competitor crumbles, this would be a big win. And it would making opting out of the dollar system much harder for the rest of the world too. So they might move on and even make a new global currency out of it at some point – which is the goal, global control. But everything is on the edge right now imho, this is a very risky game they are playing, very risky for the whole world and for the common people more than themselves of course, like usually.
Obs,
I wasn’t describing a moral or ethical issue about what the vast majority of people ought to do; I was describing an empirical hypothesis about what they ARE doing.
In Bernanke’s view, there’s too much money sloshing around in the global financial markets and not enough good investments to dry those funds up. So asset prices (which are not the same thing as the real economy) are both high and volatile.
But in this case, ethics ought to follow empirics. If there is a global saving glut, then adding more to it is not going to help anyone. You, for example, will just continue to complain about how much virtual money is out there.
Savings do not just come from families and individuals. Savings also come from businesses and governments. That makes up a major part of the national saving rate. So if Chinese families are too insecure to spend more, Beijing can still step in and spend its excess savings to help speed up the economy and alleviate the citizens’ concerns.
If American consumers are the only ones who still believe in the U.S. system, then why do the Chinese and other overseas investors still buy American bonds and prop up their currencies against the dollar?
Is it so they can buy more worthless dollars that will become even more worthless in the future? That makes no sense.
Yes, the Chicoms like to do the U.S. favors.
Have you not been paying attention? If the U.S. crashes for any reason, China’s will soon follow. Chinese businesses are far too integrated in U.S. and world markets to escape the consequences of a U.S. crash.
What’s more, the first thing the Fed will do if the U.S. economy crashes is push as much money as it can into the financial system to keep the economy afloat. And it controls far more dollars than the Chicoms control.
Yes, I too get all sentimental and misty-eyed thinking about those bank runs. Good times.
You’re free to believe any dopey thing you wish. I will not try to dissuade you. This conversation has come to natural end anyway.
Obs, Yes you did quickly give the linked essay an admirable read. I agree about the lameness of the ending. As I said, the author gestures toward solution. But yes that mere gesture is as far as he can make positive sentiment go versus the plenary evidence of all-too-human intractability.
@Pincher: “In Bernanke’s view, there’s too much money sloshing around in the global financial markets and not enough good investments to dry those funds up.”
That’s what he is saying. But its just half of the truth. The real problem is that the financial system and super-wealthy got easy money and wanted to create easy profits & power with it.
But many small businesses were still starving. Did you ever look at how much cheap money the average bank had to get in the last decade for giving a certain sum to the productive market? With the help of the state the financial system and oligarchy got billions, trillions, but on the ground you just see it “trickling down” at best. Its a huge scam and shows the complete inefficiency of the current financial system.
The virtual money and the virtual speculation is growing exponentially, but the real, productive economy (there you have it!) gets just a meagre share of it!
State banks should lend the money to useful and productive projects instead of letting this swamp growing and swallow everything.
Small productive investment is a long term oriented, still risky, strategic investment in the future.
But the banks and wealthy don’t trust the future themselves unless the investment seems rock solid, like good real estate.
The rest is just mindless speculation with those powerful, big (Black Rock, Goldman-Sachs) enough and with insider knowledge having rigged the markets.
Of course Bernanke & Co want the freedom to do whatever they want and will say whatever the public wants to hear. But like the investigations on Lehman and Goldman-Sachs have proven, among themselves they talk very, very differently.
As for China and the dollar and bonds: You explained it yourself. China still depends on the American business, is not stable and developed enough right now. And it doesnt want an open conflict with the US and thinks interdependency saves them.
So yes, they are doing the USA a huge favour, but its (for now) in their very best interest.
Obs,
No, everyone has access to this pool of capital.
American consumers use it to build up record levels of debt.
American students use it to build up record levels of debt.
American businesses use it to build up record levels of debt.
Large American corporations use it to build up record levels of cash reserves.
Companies that deal in financial products use it to proliferate those products in order to justify their business and to take advantage of all the money that is out there.
Governments around the world use it to either build up reserves (like China) or build up debt (like the U.S.).
It affects everyone. Just in different ways.
As for small American businesses, according to a 2017 Federal Reserve report on the availability of credit to small businesses, “[w]hile terms on business credit also eased, on net, debt growth was restrained by limited demand for borrowing by small businesses.“
So credit was available. Businesses looking to use that credit were not.
That squares with Bernanke’s hypothesis that there’s currently more savings than the world needs right now.