Volatility

January 16, 2011

They Admit It

Filed under: Neo-feudalism, Reformism Can't Work — Tags: — Russ @ 5:19 am

 

So they admit it.
 

And yet a number of economists seem determined to find some kind of supply-side explanation for low employment. Via Scott Sumner, I see that Tyler Cowen has been suggesting that workers are unemployed because there’s literally nothing they can do — that they have a zero marginal product. I also gather that this is what the Austrians are saying these days.

 
They admit that capitalism has definitively failed in all its promises, and that we’re at a dead end with it. Therefore we must get rid of it and start anew. What other purpose can civilization itself have, but the well-being of the productive people?
 
See also this piece. Here too they admit trickle-down 1. is a failure, 2. is a scam. (I also have a comment to that effect in the thread there.)
 
This is the only takeaway from every single word conservatives (and most liberals) say. Capitalism is a failure which belongs on the trash heap of history. They admit it.
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20 Comments

  1. So?? Who cares? “Economists” whatever that is didn’t invent capitalism. Most of them don’t understand it, and none of them live it. The practice of an abstract social science hardly lends itself to an understanding of real world activities and motivations.

    Comment by Paul Repstock — January 16, 2011 @ 5:36 am

    • Well, excuuuuse me. I didn’t know that the utter failure of capitalism was such a consensus realization yet, and that it’s therefore superfluous to suggest the full logical and moral implication of what these cadres say. I thought maybe my take on that wasn’t completely obvious to everyone, but that presented that way, some people might consider it.

      But if you’re right, I guess I can pack it in.

      Comment by Russ — January 16, 2011 @ 6:02 am

      • LOL. That as an anti-economist rant on my part.

        Comment by Paul Repstock — January 16, 2011 @ 6:24 am

      • I get it. But I think it can be worthwhile to cite the fact that they themselves have gone so far with their rhetoric against public interest action that it constitutes an inadvertent confession of the absolute bankruptcy of their ideology.

        Comment by Russ — January 16, 2011 @ 7:05 am

      • Pack what? Where?

        Comment by par4 — January 16, 2011 @ 3:44 pm

      • I was kidding.

        Comment by Russ — January 16, 2011 @ 3:51 pm

  2. Old, failed paradigms are eventually replaced by new forms. Only question is how messy the transition is!

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    Comment by Tom Crowl — January 16, 2011 @ 8:41 am

  3. From the quoted Naked Capitalism article:

    “So now the Fed has added a third mandate to its charter:

    1. Full employment
    2. Low and stable inflation
    3. Higher equity valuation”

    The Fed did not ADD “higher equity valuation”, because higher equity valuation has always been a major component of the Fed’s original intent in 1913. Does anyone really believer that mandates like “full employment” and “low and stable inflation” were even discussed at those Jekyll Island meetings? The Federal Reserve Bank was never created to make life more livable for the hoi polloi.

    Consider the reality the Fed’s quantitative easing policy. With QE1 the Fed bought $1.25 trillion worth of failing MBS, most of which had been hidden away from auditors in the level three “asset” storage sewers of the six large Wall Street holding banks, at face value. QE2 is being put directly into the hands of the Fed’s Prime Dealers, a group that reads like a who’s who of international banksters. This money is being used to monetize mid-range and longer range Treasuries to keep the Treasury auctions from failing. This keeps the carry alive between the Fed and its six largest holding banks (five of which run the FRBNY). Those financial reporters, who claim that Treasury bond rates went up, in spite of QE2, have no idea how much higher those rates could have climbed without QE2. Only a small portion of the QE2 funds have been released, and those funds are targeted by the Prime Dealers to buy only specific Treasury issues.

    It’s time to stop focusing on who is buying Treasuries, and focus instead on who is not buying Treasuries. Place China and PIMCO (the world’s larges bond buyer) at the top of the non-buyers list. The Fed is most likely hoping for a Japan-like result to its monetizing. The BOJ has been monetizing the Japanese government bond market since 1999, and Japan is still functioning. It’s still functioning even though its domestic debt is now 200% of GDP. I’m sure the Fed views what the BOJ has accomplished as a success story.

    Capitalism can not exist with corporatist banks in power. As far as capitalism goes, other than the drug and prostitution trade that we are witnessing within the post-industrial inner cities, there really isn’t much pure capitalism going on in the US.

    Comment by black swan — January 16, 2011 @ 9:42 am

    • True, but the article’s claiming that it’s new for the Fed chairman to openly admit that this is a (illegitimate) core function.

      As for pure textbook capitalism, you’re right of course that this ain’t it.

      But as for what capitalism is in reality, it’s certainly been in the deployment stage for long enough and universally enough that whatever it’s always been in practice, that is in fact what it’ll always be in reality.

      As for the textbooks, that’s just utopianism at best, and more often Big Lies.

      Comment by Russ — January 16, 2011 @ 9:58 am

      • Russ, I used to think of myself as a rational libertarian, but now I’m not so sure that the two terms are not mutually exclusive. Perhaps libertarian capitalism is just another label for social Darwinism. Western civilization may be on it’s way back to the serf system. After all, we live in a country that devolution has taken to a lower plane in which the wealthiest 400 Americans have as many assets as do the bottom 150 million of their “fellow countrymen”.

        We haven’t reached serfdom quite yet, but what we have reached is something that is starting to resemble 1861 post-serf Russia. That was the period that gave rise to the Russia’s first bureaucrat class, and to a social system that allowed the Russian nobles a buffer of bureaucrats between them and the newly liberated serfs. As it turned out, many serfs had been better off under the nobles than they were under the rule of the bureaucrats. In the US, the financial overlords have done an excellent job of hiding behind the layers of public bureaucrats they so totally control.

        Comment by black swan — January 16, 2011 @ 11:56 am

      • I think we’re headed back toward a form of debt indenture which will be similar or identical to the old sharecropping system in many ways.

        Comment by Russ — January 16, 2011 @ 3:55 pm

    • The so-called “dual mandate” was officially added by statute in 1978 after a trial run begun in 1975 as the result of a Congressional resolution.

      Congress had been convinced by Milton Friedman and other monetarists that the Fed should manage monetary and credit aggregates instead of interest rates, so Congress mandated the change beginning in 1975, along with the regular reports to Congress.

      The Fed abandoned trying to manage monetary and credit aggregates shortly after Volcker proved that Chicago monetarism didn’t work. Remember, the reason that Volcker pushed the Fed funds rate so high was to cause a contraction in money supply by putting the breaks on borrowing. It didn’t work. All that happened was that low margin manufacturing businesses couldn’t make enough money to service their debt, so they went out of business and unions were busted.

      So, in practical terms, the Fed has not followed the dual mandate since 1983 because it has not sought to target/manage the aggregates.

      Comment by Tao Jonesing — January 16, 2011 @ 3:04 pm

      • Phony breaks on government debt? Destroy manufacturing? Bust unions? Sounds to me like it worked like a charm, by their lights.

        But did the Fed ever really recognize any mandate other than economic manipulation for the benefit of the banks? Not that I’m aware. It’s sort of like SCOTUS “justices” with their bogus jurisprudential philosophies they adhere to only when it would produce the desired result.

        For myself, I just found it telling that Bernanke admitted that blowing up a stock bubble is his priority. It’s hard to see how that serves the official mandate even according to the most idiotic trickle-down voodoo.

        Comment by Russ — January 16, 2011 @ 4:04 pm

    • This money [QE2] is being used to monetize mid-range and longer range Treasuries to keep the Treasury auctions from failing.

      QE2 has nothing to do with U.S. Treasury auctions. Treasury auctions soak up bank reserves that already exist. Primary Dealers are required to bid. The Treasury and the Fed work closely to coordinate auctions with the amount of reserves in the system. Auctions are designed in advance not to fail, not that it would matter if one did.

      The auctions are designed to succeed because they are merely targeting reserves that they KNOW are in the system. There is no red phone at Treasury that Tim Geithner uses to call China before it spends money. No red phone to Japan. There is only a phone to the Fed where reserve forecasters communicate with the Treasury and the Primary Dealers to determine the size of the necessary auctions. The reserve drain is thus accomplished, Congress thinks we have “funded” our spending and we can all go along our merry way. (more info)

      Comment by reslez — January 18, 2011 @ 7:03 pm

  4. I saw this on NC but didn’t comment there.

    “So now the Fed has added a third mandate to its charter:”

    1. Full employment
    2. Low and stable inflation
    3. Higher equity valuation”

    Firstly I have a problem with non elected branches of government defining their own “mandate”.

    Secondly, allow me to decode this:
    1) The Fed gets to define “full employment”
    2) deflation
    3) a pumped up stock market bubble

    At present, I only see the Fed as having authority over one of these, though QE II is an obvious deal to underpin #3.

    Comment by Paul Repstock — January 16, 2011 @ 12:56 pm

    • Oh well, the rare times anyone tries to hold them accountable they suddenly claim to be a private entity, not a governmental one. They argue that vs. calls for transparency, for example.

      It’s the same old heads-I-win-tails-you-lose.

      But if we view things corporatistically, we achieve the equal and opposite moral, political, and constitutional perspective. These entities (government agencies, big corporations, globalization cadres, a thing like the Fed) are simply smeared out between public and private. They want their word to become flesh at whatever point is convenient for the corporate interest.

      We must simply turn this right side up, and declare that the reality is whatever achieves the public interest outcome.

      The proof that this is true? Because all power resides in the people. All sovereignty resides in the people. The Constitution is derived from We the People. Since the people can never contemplate their own destruction, enslavement, or harm, it follows that the Constitution always seeks the public’s well being. So if we have hybrid entities, dubious at best from the Constitution’s perspective, and more often clearly odious; and these entities freely chose to define themselves ambivalently; then it follows that the Constitution always chooses the definition and the perspective which is most beneficial to the people.

      If in any case this perspective is the one most harmful to the criminals (and it almost always will be), that’s as it should be. That’s the genius of the sovereign people.

      Comment by Russ — January 16, 2011 @ 4:14 pm

  5. There is no valid description for the creation of a massive permanently unemployed underclass in the wealthiest nation in the world, by the wealthiest kleptocratic elite in the world, other than “class war”. This is class war. Academic economists are little more than oracle bone readers for the new elite. Their role is to flatter the king, keep the people mystified with mumbo-jumbo, deflect blame from themselves, and maintain power at all costs. Any description that does not acknowledge the violent, revolutionary corporate assault on the working class is worthless.

    Comment by paper mac — January 17, 2011 @ 2:14 am

    • That’s definitely necessary for the description, and almost sufficient as well.

      Comment by Russ — January 17, 2011 @ 5:03 am

  6. Tyler Cowen has been suggesting that workers are unemployed because there’s literally nothing they can do — that they have a zero marginal product. I also gather that this is what the Austrians are saying these days.

    What a repulsive ideology. To pretend some human beings have zero economic value — when in point of fact the system robs people of their natural productivity so that elite thugs can profit from depressed wages.

    The Austrians are a nihilistic gang. They decry debt, which is partially correct, but when you ask them for solutions they all cheer for grinding poverty imposed on the many to enrich the few. Their ideology would recreate the Great Depression which led to the genocidal feuds of WWII. Completely worthless.

    Comment by reslez — January 18, 2011 @ 7:07 pm

    • “Would recreate” – I think it’s already played its role in recreating. We’re sinking into that Depression now.

      Comment by Russ — January 19, 2011 @ 2:42 am


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