Three Must-Reads On The Political Economy
A World Flying Blind - Andy Xie - Caixin Online
The outlook for the global economy is gloomy and leaders lacking vision are to blame. Eventually, this will come back to haunt all of us
At the annual World Economic Forum in Davos we again saw familiar faces from the West, but some different characters from emerging economies. Some of the last year's bunch went to jail amidst the revolutions engulfing the Middle East. They were discussing how to fix capitalism. Apparently, the same people who blew up the world and got their governments to bail them out are now again making millions and talking about how to fix things. Not many people see the irony in this. The tragedy of the global financial crisis is that it didn't sweep away the old order.
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The world is a dangerous place because it is being led by the wrong people like the Davos crowd. Monetary and fiscal measures merely prolong the stagnation and stoke inflation down the road. This muddling-through equilibrium will blow up in our faces when inflation causes social turmoil.
David Graeber’s Debt: My First 5,000 Words - Aaron Bady - The New Inquiry
[I]f “debt” doesn’t seem simple and quantifiable and reducible to numbers, some of the more irreducibly complex moral vocabularies that other human societies have used to think about the problem start to come into view. Another world isn’t just possible, but other worlds have happened, almost nothing but other worlds. And this is, I think, the richest and most engrossing part of the book (and to which I must, by necessity, give shortest shrift), Graeber’s survey of the vast anthropological record which is available to us, but so often unread, describing or at least suggesting how different human societies have considered these questions, human societies who did not believe that paying one’s debts or facing the consequences was the very highest of moral imperatives.
Valediction - on saying farewell to Tony Judt - G.J. Meyer - LA Review Of Books
Towards the end of Thinking the Twentieth Century’s last chapter, Judt suggests the chillingly plausible possibility that we are, perhaps, in the process of becoming China: of becoming, that is, “an unfree capitalist society” in which the government stays out of the economy except at the loftiest strategic levels (eliminating competition from outside, for example) while remaining brutally repressive politically, systemically corrupt, and, yes, indifferent to injustice. He notes that American voters, in expressing their preferences at election time, seem to be indicating that they prefer the Chinese model not only to European social democracy but even to the genuinely democratic achievements of their own still-recent past.Bonus:That, Judt says, is what he finds “terrifying.”
The Top Twelve Reasons Why You Should Hate the Mortgage Settlement - Yves Smith - Naked Capitalism
Here are the top twelve reasons why this deal stinks:
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- We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.
As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.
Posted by b on February 9, 2012 at 13:54 UTC | Permalink
Some great material there, b. Thanks for suggesting it.
Posted by: Morocco Bama | Feb 9 2012 14:41 utc | 2
I’m afraid Greece is about to descend into chaos.
Snippets.
The latest written general report from the police states that they are no longer sure of being able to contain riots, because there is no longer any identifiable opposing parties, such as union(s), strikers (from some body, profession), or politically anchored (e.g. communists) movement, and indignants have gone. Nothing they can see, understand, identify. (Contrast that with how the MSM particularly Anglo reports on the situation.)
The head of the Police Union said on TV on Tuesday that if police salaries are cut, say by 100 euros, it will be war. As I understand it, this was not a threat, but an observation. Policemen have families and friends..
AND ....There are many, many reports of gangster raids made by groups composed of police and citizens together. They storm the house, demand money, beat, etc. Their targets: migrants, i.e. non-Greeks. They demand ‘fines’, handcuff ppl, gather all the money in the house, etc.
The Hospital in Kilkis has been taken over by the workers. They are dealing with emergencies only and no longer recognize the Health Authorities; it is self-governed. They refuse to make demands for themselves ( = “special interest” not common good, with the exception of salaries as now fixed being paid.) They want to keep the hospital open, save free care, and are appealing to local solidarity, etc.
AND ... Docs charge for their services, cash under the table. (Curiously, the ‘professions’ have banded together and decided to boycott German goods! Ha ha they already all have mercs.)
There are 20 000 homeless ppl in Athens. Besides that, ppl are going hungry and all kinds of food collection / sharing is going on; soup kitchens - trying to feed schoolchildren, etc.
AND ...The Greek Gvmt. has issued a decree stating that only Gvmt. approved/run organisms can give or serve free food.
- from some greek blogs / a greek friend
see e.g. http://greekcrisisnow.blogspot.com/ in French
Why? Economic mismanagement from the time GR joined the Euro. GR has been called the ‘canary in the coal mine’, the ‘test case’, etc. I believe that all the arrangements proposed until now (I was in the camp that said GR should have defaulted years ago, and still should just do that today) have been a mixture of group think, stupidity, the slow agonizing meets where no-one can agree and even the proper numbers are missing; in favor of the banking cartel, they will be the first losers; dependent on side-issue political calculations (e.g. Merkel wants to punish the Greeks as that is what may push the electorate to accept more bail-outs .. just an example, fanciful perhaps, but that kind of political calculation...)
So many other ‘solutions’ were possible, that none were taken shows deep rot or sadism in the entire system. Meltdown.
GR is minuscule in EU terms (land, GDP, participation.) Possibly:
> GR could have defaulted back in 2008, either quitting the Euro or not, or even leaving the EU. With a bit of help from friends, it would have been OK by now.
> The EU might have decided to not follow ‘the market’ and simply peg GR debt at 3 - 4%. (Now there is a weird idea...)
> Troika - or some world body like it - could have decided that stimulus would be cheaper and more sensible / lucrative than bail-outs and austerity. A small fraction of the bail-out money poured into GR as investment might have helped GR to *continue paying its debts.* Difficult, I realize (what to invest in?)
The EU might have considered that the few million ppl in Greece just need for a while, handouts. Our Greek brothers and sisters..
And so on...but No, No.
Conclusion: the whole system is completely rotten, and discussing around the edges is no longer any use.
Posted by: Noirette | Feb 9 2012 17:08 utc | 3
fwiw. Posts like this are the reason I read this blog.
Posted by: slothrop | Feb 9 2012 17:28 utc | 4
I read David Graeber's book on the history of debt (after a excerpt was posted on Naked Capitalism). It was quite an interesting reading which gives a radically different vision of what debt is than the sacralized over-moralistic vision that we are getting from the media. I recommend it.
Posted by: ThePaper | Feb 9 2012 21:06 utc | 5
The outlook for the global economy is gloomy and leaders lacking vision are to blame. Eventually, this will come back to haunt all of us
That means the outlook is good. Energy getting more expensive means local economy. With 21st century knowledge and methods.
"In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.
Frankly that is what I do. I am not the only one.
Posted by: somebody | Feb 9 2012 22:08 utc | 6
Nice to see Aaron Bady and Graeber getting more attention. I'm reading all of Graebers books. He's the Godfather of Direct Action. I thought Debt would be the first read when ordering them, but it will be the last. Bady's blog http://zunguzungu.wordpress.com/ is one I've enjoyed for quite some time now. Following Bady from the beginning of Occupy Oakland... well, I hope he writes a book someday.
Posted by: Eureka Springs | Feb 9 2012 23:02 utc | 7
Fifty State Attorney Generals can agree on one thing. Give the Banks a get out of jail card for forgery and theft. The fact that millions of families were kicked out of their homes does not mean a thing. Greed won.
We live in Mafia run world of kick backs. America’s wars are too big of a cash machine to ever let them be ended. Money still flows through Baghdad into corporate coffers even though the last American soldier left over a month ago.
We are witnessing the birth of the Neo Dark Age.
Posted by: VietnamVet | Feb 10 2012 3:43 utc | 8
so -basic conlusion is what?
time to cut out the BS
the real answer is that you'll get arrested for giving the REAL answer
mkay
http://www.youtube.com/watch?feature=player_embedded&v=8UVNT4wvIGY
Posted by: Hu Bris | Feb 10 2012 3:59 utc | 9
Noirette, that isn't funny "snigglets" I was excited to see some Rich Hall comedy but alas no.
Posted by: scottindallas | Feb 10 2012 15:44 utc | 11
I think we will soon come to the end of the road for the policies inspired by neo-keynesianism and neo-liberalism. Debt can only be substituted for real incomes and savings for so long. Ultimately the math catches up. In the US, we have followed for several decades neo-keynesian and neo-liberal policy ideas of borrow in good times and bad times while privatising profits and socializing speculative losses to maintain an inflated standard of living well north of what it would be based on the productivity of our economy. Over the past 10 years global total credit market debt has grown at a compound rate of 9% annually while economic output has only grown at a 4.5% rate. At these rates, debt doubles every 8 years while it takes 16 years for economic output to double. It does not take rocket science to know that this is unsustainable for too many more doubling periods. What is important to note is that the neo-keynesian and neo-liberal economic policies of the past 50 years have lead to increasing concentration of wealth, stagnant to declining median real wages and massive promises to pay social benefits that are unfunded.
While the dividing lines always seem to be right vs left, liberal vs conservative and Democrat vs Republican - the fact of the matter is that both these sides brought us to where we are now. The liberals have been behind increased social benefit promises that were never fully paid for. As an example, federal spending on health benefits grew from around $50 billion in 1980 to some $800 billion last year becoming an ever larger percentage of federal spending each year. Mathematically this spending rate will not make another couple doubling periods. The conservatives have been behind increased borrowings as taxes were cut and spending ramped up on all sorts of corporate subsidies. Both sides played a major role in continuous war and national security state apparatus build-up. Liberals want to fight "humanitarian" wars, while conservatives want "ideological" wars. Both sides played a significant role in creating the Wall Street free lunch - speculative profits to the few while losses get passed on to taxpayers when the speculations go awry.
At the end of this debt supercycle both the left and right will be discredited. Central banking will become a dirty word. It should, considering that the purchasing power in the US has been obliterated some 98% over the past century. Financialization of economies as the uber-strategy will be laughed at. Hopefully the Republican and Democratic parties will become extinct and the corruption of the political elites will be restrained at least for a short period until memories fade. Maybe common sense may appear in our economic and political thinking as a replacement for our current magical thinking.
Posted by: ab initio | Feb 10 2012 15:47 utc | 12
This, really excellent article, is just out at al jazeea
Posted by: Maff | Feb 10 2012 15:59 utc | 13
Ab, you calculation of inflation over the last century is specious. Compare what an hour's worth of work will buy you. The negative trend starts with the Reagan low tax revolution. High tax rates encourage capital intensive investment, as those firms are able to write off their investments, and depreciate them. Both of these acts are enhanced with higher top marginal tax rates. Low, flat taxed encourages high executive salaries, financial speculation and other capital lite endeavors. Look at Germany's high taxes, they actually protect those exporting firms
Posted by: scottindallas | Feb 10 2012 22:09 utc | 14
scottindallas@14:
It is easy to make all kinds of assertions especially when you have a theory in search of facts.
".... you calculation of inflation over the last century is specious."
The Fed data that I used is what is generally accepted and actually understates inflation compared to what John Williams at ShadowStats and several others claim.
The Federal Reserve Bank of Minneapolis has a purchasing power calculator on their website which states "What is a dollar worth?". According to that calculator, it would take $22 in 2010 to purchase the same goods and services that $1 purchased in 1913 when the Fed was formed. Similarly, a dollar in 1980 would have purchased an equivalent of $2.65 in 2010.
http://www.minneapolisfed.org/
Posted by: ab initio | Feb 11 2012 1:02 utc | 15
again, rating goods against other goods, or what you could earn in an avg. hour is a more reliable metric. Production has increased so much in that time that a dollar has changed in every sense. You need to compare inflation against production gains to get a truer figure.
Posted by: scottindallas | Feb 11 2012 3:50 utc | 16
The comments to this entry are closed.
Democratic voters seem to be suffering from a form of Stockholm syndrome. Their leaders have hijacked them, quietly repudiating their basic interests, and slowly tightening the noose around their necks, yet Democrats remain curiously content.
Jobs? What jobs?
Prosecution of banksters, torturers, polluters, and war profiteers? What prosecutions?
Detaining "terrorists" any time, any where, forever? No problem!
The reaction of Democrats? Forbearance! After all, Republicans have made life hard for Obama and the Democratic majority in the Senate. And, remember, Obama is the lesser of two evils!
Yeah, right!
Posted by: JohnH | Feb 9 2012 13:40 utc | 1