Seems We Can't Blindly Trust Either Political Party - Bill Clinton Was As Bought As They Come (Bush & Obama ... & us too?)

   (Commentary posted by Roger Erickson)



Maybe even more bought than Dubya? And what does that portend about who
REALLY owns Obama?

What'd Mark Twain supposedly say? "It is easier to fool people than to convince them that they have been fooled."

Picking up an theme once discussed in comments at Warren Mosler's blog, do we have a simple class war between two industry segments?

DNP - bought by the banking (& entire F.I.R.E.) industry? 

GOP - bought by the oil & F500 & MICC & general mfg industry?

While the MiddleClass is kept divided & conquered, bickering over which serf-master to capitulate to? Worse, are these two lobbies now colluding, to permanently own the US Middle Class?

Can we at least get a 3rd party (software industry?) or no parties at all? Instead, just distributed democracy, like during George Washington's 2 original terms?

Seems we can't blindly trust either political party, and need to set our sights on trusting our distributed electorate ... and what's left of our democracy.

If this concept resonates with you, then read on. The following is posted, with permission from Chuck Spinney. It may appear later on his personal blog.

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---------- Forwarded message ----------
From: Chuck Spinney

Attached herewith is an important report in the Guardian. It places the deregulation of Wall Street during the Clinton Administration into a particularly smarmy perspective by examining documents just released by the Clinton library. Note the connections to players now in the Obama Administration.

This report paints a revealing albeit depressingly familiar portrait of how the iron triangle of individuals and money moving between government executive positions, and private sector, together with friendly legislators in Congress encourages corruption that leads ultimately to taxpayer bailouts. Consider please the following:
1. Note how the memos make it look like President Clinton was being rushed, implying a certain degree of passivity and manipulation by advisors. But before taking this at face value, bear in mind, Clinton was never a passive actor; quite the opposite, he was a highly energetic president. He set the tone, and he picked these advisors; he stayed with them; and he passed many of them on to President Obama.

2. Note that the repeal of Glass Steagall -- Clinton’s signature deregulation of the financial markets and perhaps the major contributor to the rise of speculation that culminated in 2008 crash -- was not a last minute affair. In fact, the memos show effort to repeal reaches bat to at least in February 1995 and May 1997 and the reference to eating the paper after you read it suggests a degree of malevolent cynicism.

3. Note the tight connection between the repeal Glass-Steagall and the pending Citigroup merger with Travelers Group, and particularly, the central the role played by Secretary of the Treasury Robert Rubin in the promotion of the of that repeal. Rubin was Secretary of the Treasury from 11 January 1995 to 2 July 1999 -- the period covered by the memos contained in the Guardian report.

4. Finally, the reader should note that four months after leaving the Treasury Department, in Oct 1999, Rubin joined Citigroup. Here is a contemporary portrait painted by a 27 October 1999 report in the New York Times,

“Mr. Rubin, 61, a former top official of Goldman, Sachs & Company, said yesterday that he had joined Sanford I. Weill and John S. Reed, the chairmen and chief executives Citigroup, in what Mr. Reed described as a ''three-person office of the chairman'' that will oversee what has become the first true American financial conglomerate since the Depression.
The appointment came less than a week after the Clinton Administration and Congress agreed on a compromise bill that would overhaul the laws that regulate the financial industry, a measure that removes many of the restrictions preventing banks, securities firms and insurance companies from buying one another or engaging in one another's businesses. Both Mr. Rubin and Citigroup strongly supported the bill, which would greatly benefit the company. Mr. Rubin said he played a role in arranging the final compromise that will probably lead to the repeal of the so-called Glass-Steagall legislation. But he said that had nothing to do with his decision to join the company.”

By 2007 Rubin was Chairman of Citigroup. And in 2008, nine years after the repeal of Glass Steagall, the worst financial crisis since the Great Depression hit Wall Street to trigger the worst and longest recession since the Great Depression. That crisis, among other things, collapsed the stock markets, destroyed retirement nest eggs, wrecked the housing markets, and put millions of people out of work — and our nation has still not recovered. Then the “best government money can buy” added insult to injury by bailing out of the banks that created the mess, while ducking the issue of re-regulating their behaviour with anything close to proven power of defunct Glass-Steagall Act. Some observers are now warning the government’s failure to reign in speculative behaviour is setting the stage for yet another crash (e.g., here and here)

And what about Rubin’s role? According to information in Wikipedia, on 3 December 2008, shortly after the financial collapse, the Wall Street Journal characterized Rubin’s mix of oversight and management responsibilities at Citigroup "murky." In an interview with the Journal, Rubin defended himself, saying: "I think I've been a very constructive part of the Citigroup environment." But, the Journal reported that Citigroup shareholders suffered losses of more than 70 percent since Rubin joined the firm and that he encouraged changes that led the firm to the brink of collapse.[23] Investors filed a lawsuit in December contending that Citigroup executives, including Rubin, sold shares at inflated prices while concealing the firm’s risks. A Citigroup spokesman said the lawsuit was without merit.[24].

But what happened to Rubin personally? According to a 20 September 2012 report in Bloomberg, Rubin received a total compensation of $126,000,000 from Citigroup between 1999 and 2009. Among other things, the former eagle scout is now co-chairman of the prestigious Council on Foreign Relations.

Chuck Spinney   The Blaster

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Wall Street deregulation pushed by Clinton advisers, documents reveal

Previously restricted papers reveal attempts to rush president to support act, later blamed for deepening banking crisis

Emily Eakin — Capital Man

The Economist declared that Piketty’s book may "revolutionize the way people think about the economic history of the past two centuries" and started an online reading group to discuss it chapter by chapter. The British magazine Prospect added Piketty to its annual list of the most influential world thinkers, and his book was said to be making the rounds in the office of Ed Milliband, the British Labour Party leader. Documentary filmmakers were vying for the chance to turn the book into a movie; a composer was seeking Piketty’s blessing to make it an opera.

Now the 42-year-old Frenchman had come, like a wonkish heir to de Tocqueville, to tell Americans how to salvage what he called their "egalitarian pioneer ideal" from a potentially devastating "drift toward oligarchy." His anointment was all the more remarkable in that he intended his book not just as a novel argument about inequality but as a pointed rebuke to his field—in particular its American wing.

On Monday, Piketty’s stops included the White House Council of Economic Advisers, the Government Accountability Office, and the office of the Treasury secretary, Jacob Lew, who summoned him for a private sit-down to discuss his proposal for a progressive tax on wealth. On Tuesday, he appeared in the company of Nobelists: George Akerlof, who, introducing Piketty to a group at the International Monetary Fund, declared that he had "entered rock stardom—economist-style"; and Robert Solow, who, at the Economic Policy Institute, where a crowd of several hundred had braved a freezing downpour to hear Piketty talk, praised the originality of his argument and the "sheer collection, presentation, and analysis" of his data, predicting that "we’re going to be digesting that for a long time."

The Chronicle of Higher Education

Capital Man
Emily Eakin
(h/t Brad DeLong)

Tim Fernholz — Ten questions for Thomas Piketty, the economist who exposed capitalism’s fatal flaw

Tim Fernholz interviews Thomas Piketty.

Quartz
Ten questions for Thomas Piketty, the economist who exposed capitalism’s fatal flaw
Tim Fernholz

Scott Kaufman — Oklahoma students know less about evolution after Biology I than they did before taking it (via Raw Story )

Oklahoma students know less about evolution after Biology I than they did before taking it (via Raw Story )

A study published in the latest edition of Evolution: Education and Outreach demonstrated “the average student…completed the Biology I course with increased confidence in their biological evolution knowledge yet with a greater number of biological…

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Dan McMillan — Charles Darwin’s tragic error: Hitler, evolution, racism and the Holocaust

Darwin gets the rap for a specious theory similar to his propounded by Herbert Spencer, who has been largely forgotten today but in his time his writings were as famous as Darwin and Spencer made his living from book sales. "Social Darwinism" is actually Herbert Spencer's creation, through the influence of Malthus, Galton, and Lamarck as much as Darwin, although the term was not applied to Spencer until much later. Spencer published his evolutionary theory three years prior to the publication of Darwin's The Origin of the Species.

... propagandists who are opposed to evolution often try to blame Darwin for the policies later known as social Darwinism. However, these views were primarily associated with the English sociologist Herbert Spencer. In his 1851 bestseller Social Statics, Spencer developed most of the ideas attributed to social Darwinism when he argued that the poor should not be helped through government programs, but should be allowed to die for the betterment of society: — Deconstructing Social Darwinism (for an alternative view see Damon Root, The Unfortunate Case of Herbert Spencer: How a libertarian individualist was recast as a social Darwinist)

It was Spencer for example that connected evolution with social progress, not Darwin, and his notion is different from Darwin's natural selection. Moreover, the idea that evolution toward progress is driven by "survival of the fittest" is Spencer's, and Spencer coined that phrase, not Darwin. Spencer's use of the notion is a misstatement of Darwin's theory of natural selection. Darwin did use "survival of the fittest" in the fifth edition of On the Origin of Species after it had become well-known after Spencer, but he gives a different meaning there from Spencer's usage with respect to social progress. 

Darwin did not connect his theory of natural selection with social progress. That idea was Herbert Spencer's.

But the claim that Spencer's notion of evolution and social progress bastardized Darwin's theory of natural selection and that Spencer was the progenitor of "social Darwinism" does't fully capture the story either, since there is much more to the history. See Deconstructing Social Darwinism, parts 1-4.

It's important to understand this since what developed into "social Darwinism" from the POV of the left lies at the foundation of much social, political and economic thinking on the right, as well as underlying neoliberalism as a social and political ideology. Moreover, Libertarians claim Spencer as a forerunner and early Libertarian:  "Murray Rothbard, on the other hand, praised Social Statics as 'the greatest single work of libertarian political philosophy ever written'.” — Matt Zwolinski, A Bleeding Heart History of Libertarian Thought – Herbert Spencer.

Lionized on the right, and demonized on the left. Given the shift of the universe of discourse to inequality, we are probably going to be hearing a lot about this, at least implicit in the discussion if not explicitly.

Salon
Charles Darwin’s tragic error: Hitler, evolution, racism and the Holocaust

Dan McMillan

Jared Bernstein — Dude, Where’s Your Piketty Review??!!

I’m way late in weighing in on Thomas Piketty’s great book “Capital in the 21st Century,” (note the lack of subtitle–I like that–gives the title that much more weight!). That’s because I’m reading it really slowly but I’m almost done.

Why so slow? In part, because I’m savoring it–it’s a wonderful read, with trenchant insights every few pages, and there are lots of pages. Also, the damn thing is dense, and often after reading a few pages I realize I haven’t absorbed the last few paragraphs, so I need to take a break. Probably my own absorptive capacity ain’t what it used to be.

And, of course, there’s been no shortage of insightful economists weighing in. Anyway, a very few insights off of top of head, with the caveat that I’m still processing all of this:... 

Jared Bernstein | On the Economy
Dude, Where’s Your Piketty Review??!!
Jared Bernstein

The book out how long? And people are already feeling they have to apologize for being late to review it. Wow. This is one hot item for a dense tome on economics and economic history.

Best line: "As [Piketty] says in the NYT today: “…capitalism and markets should be the slave of democracy and not the opposite.”

Noteworthy: "This cosmology observation is far from a critique–it’s what Krugman means when he says the book will change the way we think about the economy. I certainly hope Paul’s right about that. It’s been interesting to see the lack of response from the right, though I’m sure it’s coming."

This could actually be the Copernican Revolution in economics rather than the Newtonian as Bernstein suggests. Previously, economic both Keyensian and Neoclassical have focused on the business cycle. Piketty shifts that focus to the centrality of systems comprised of people and institutional arrangements that generate social and political results as well as economic ones.

The issue is not so much inequality, which is a symptom. The issue is the asymmetrical power that great wealth bestows and how that power adds to great wealth unless it is distributed politically through functioning democracy.

Of course, this is not unique to capitalism but rather it is the history of surplus societies where deciding who gets what share of the surplus is the overriding concern socially, politically and economically. This has almost invariably resulted in highly asymmetrical social status, political power, and economic wealth in terms of class structure and institutional arrangements.

Why do I think this is likely to be a Copernican Revolution in economics?

Just a note re his fame (see NYT link above re that). So I get a typical call from a reporter the other day, asking me what I thought about some developments around poverty policy. He then asks, “And how do you think Thomas Piketty would answer these questions?” And, having intellectually “lived with” TP for a few weeks now, I actually think I gave a pretty good answer!

Not Keynes, not Hayek, not Friedman, not ..., but Piketty. The universe of discourse is changing not only in econ but also in the media.

On the other hand...

It’s been interesting to see the lack of response from the right, though I’m sure it’s coming.

I expect that a withering attack is in preparation and they are now putting together the talking points, probably in consultation with Frank Luntz.

 

Steve Roth — Lane Kenworthy, Prosperity, and the Infinite Forms of “Redistribution”

Which brings me to another recent paper (prominently citing the previous one), that questions the Left’s rhetorical emphasis on (in)equality:

I fear the American left’s recent move to put income inequality reduction front and centre might be harmful rather than helpful. It may foster a conviction that the key to addressing America’s social, economic and political problems is to reduce the top 1 per cent’s share or the Gini coefficient. That could distract attention from more direct and effective efforts to address those problems.

Such efforts include fully universal health insurance; improvements in eligibility, duration and benefit level for various social-insurance and social-assistance programmes; wage insurance; early education; enhanced financial support for college; a minimum wage indexed to prices; an expanded earned-income tax credit indexed to average compensation; and monetary policy less tilted towards inflation avoidance.

Policy changes like these would go a long way towards improving economic security, enhancing opportunity (and mobility) and ensuring shared prosperity in the US. Inequality of political influence could be lessened via direct reforms, such as reversal of the Citizens United decision, introduction of a strong transparency rule and public funding for congressional election campaigns.

Asymptosis

Lane Kenworthy, Prosperity, and the Infinite Forms of “Redistribution”
Steve Roth

Another approach to reducing inequality rather than the global wealth tax proposed by Piketty, which everyone already agrees is going nowhere.

AFP — Obama signs ‘terrorist activity’ law aimed at barring Iranian U.N. envoy

The beginning of the end of the United Nations as US increasingly asserts global hegemony.

The Huffington Post
Obama signs ‘terrorist activity’ law aimed at barring Iranian U.N. envoy
Agence France-Presse

Geoff Davies — More effective remedies for inequality than Piketty’s

I have read only reviews of Thomas Piketty’s Capital in the Twenty-First Century, but clearly it is valuable for documenting the nature and history of inequality over the past century or three, and for highlighting the excessive political power that flows from super-wealth. Yet he frames it in terms of capital and capitalism and, for all the quality of his diagnosis, his main prescription evidently is just to tax the wealthy, through income and inheritance taxes.
The trouble is, capital and capitalism are very ill-defined. To speak of capitalism is to invite an un-constructive shouting match. Capitalism has caused great harm to people and the world! Yes but capitalism is what has made us rich!

A more useful framing is that there have been, and can be, many ways to structure a market economy. When one looks into the mechanisms that have operated in market economies, one can readily identify mechanisms that pump wealth from the 99% to the 1%. One can then think of ways to stop or reverse these flows, so wealth flows more fairly to everyone involved in its generation. It will be much more effective to fix the problems at the source than just to apply traditional retro-active bandaids like taxes.

In my own book Sack the Economists, I identified seven fairly obvious such mechanisms. Below is an edited excerpt that summarises mechanisms identified in the course of the book’s analyses. (Dean Baker has also made lists, short and longer, which are a little more detailed and only partly overlapping with mine.)

Real-World Economics Review Blog
More effective remedies for inequality than Piketty’s

Geoff Davies

Sack the Economists is available for $4.99 at Amazon Kindle.

Ben Dyson — Economics textbooks teach a “mythological” story about what banks do, claims former bank regulator Lord Adair Turner (Full transcript)

Video and transcript of Adair Turner's INET presentation.

Positive Money
Economics textbooks teach a “mythological” story about what banks do, claims former bank regulator Lord Adair Turner (Full transcript)
Ben Dyson

Daniel Little — The near future

There is a lot going on in America and the world today: climate change, increasing separation between the rich and the non-rich, entrenched poverty in cities, continuing effects of racism in American life, and a rising level of political extremism in this country and elsewhere, for starters. Add to this politico-military instability in Europe, continuing social conflict over austerity in many countries, and a rising number of extreme-right movements in a number of countries, and you have a pretty grim set of indications of what tomorrow may look like for our children and grandchildren.

How should we think about what our country will look like in twenty or thirty years? And how can we find ways of acting today that make the prospects for tomorrow as good as they can be?

UnderstandingSociety

The near future
Daniel Little

Market liberalization together with technological innovation have resulted in many of the challenges humanity faces, in that the pursuit of efficiency leads to consolidation and elimination of redundancy, as well as negative externalites, that ignore rising risk to vital systems. The only way to address the risk that this engenders seems to be through government action, since markets are apparently not self-correcting in this respect, and there are political obstacles to that happening in the current neoliberal environment.

John Pilger — The Strangelove Effect - or How We Are Hoodwinked Into Fighting a New Cold War

While President Obama seeks more money for nuclear weapons than at the peak of the Cold War, the era of the comedy movie, Dr. Strangelove, it's no joke that the United States is seeking to dominate the Eurasian landmass, stretching from China to Europe.

The Heartland.

Truthout
The Strangelove Effect - or How We Are Hoodwinked Into Fighting a New Cold War
John Pilger

YouGov Poll Results: Poverty

The public is not buying into the conservative line of blame the victim.

These are the topline results of a YouGov/Huffington Post survey of 1000 US adults interviewed April 15 - 16, 2014 on poverty. The results show that people tend not to blame poverty on individual failings. The margin of error is 4.3%.

YouGov Poll Results: Poverty

Michael McAuliff — Elizabeth Warren Book Is A Liberal Call To Arms That Rips Tea Party 'Magical Thinking'

Elizabeth Warren's new book isn't just a memoir -- it's a full-throated endorsement of modern, populist liberalism and a scathing indictment of anti-government "magical thinking" by the tea party.

While the Democratic Massachusetts senator structures her new volume, A Fighting Chance, as a chronological tale of her life, she also uses her experiences to make strategic points and arguments about her political philosophy, which embraces government and the labor movement as forces for good.

"We can't bury our heads in the sand and pretend that if 'big government' disappears, so will society's toughest problems. That's just magical thinking -- and it's also dangerous thinking," Warren writes. "Our problems are getting bigger by the day and we need to develop some hardheaded, realistic responses. Instead of trying to starve the government or drown it in the bathtub, we need to tackle our problems head-on, and that will require better government."

She's off to a good start. Small government versus good government. What a novel idea.

The small government argument is based on the assumption that good government is impossible or at least highly improbable, as well as the assumption that democracy doesn't work.

The good government argument is based on the assumption that government is of the people, by the people and for the people and democracy works. You know, like it says in the preamble to the US Constitution.

The Huffington Post
Elizabeth Warren Book Is A Liberal Call To Arms That Rips Tea Party 'Magical Thinking'
Michael McAuliff

Also McAuliff's Elizabeth Warren's New Book Skewers The White House Boys Club

She doesn't always say it directly and she usually cuts the sting with some praise, but Warren seems particularly disappointed with two of the lions of Obama's economic team: former Treasury Secretary Tim Geithner and former National Economic Council boss Larry Summers....

Learning how the inside game works.

"[Summers] teed it up this way: I had a choice," Warren writes. "I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People -- powerful people -- listen to what they have to say. But insiders also understand one unbreakable rule: They don't criticize other insiders."...

... Geithner brought home to her that "[d]espite the way it was sold, TARP was about saving banks, pure and simple."

"There it was," Warren writes. "The Treasury foreclosure program was intended to foam the runway to protect against a crash landing by the banks. Millions of people were getting tossed out on the street, but the secretary of the Treasury believed the government's most important job was to provide a soft landing for the tender fannies of the banks...."

"The president chose his team, and when there was only so much time and so much money to go around, the president's team chose Wall Street," she writes.

Mises on the four classes of people and the basis of the market society

"Saving—capital accumulation—is the agency that has transformed step by step the awkward search for food on the part of savage cave dwellers into the modern ways of industry. The pacemakers of this evolution were the ideas that created the institutional framework within which capital accumulation was rendered safe by the principle of private ownership of the means of production. Every step forward on the way toward prosperity is the effect of saving. The most ingenious technological inventions would be practically useless if the capital goods required for their utilization had not been accumulated by saving.

"The entrepreneurs employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not-yet-satisfied wants of the consumers. Together with the technologists, intent upon perfecting the methods of processing, they play, next to the savers themselves, an active part in the course of events that is called economic progress. The rest of mankind profit from the activities of these three classes of pioneers. But whatever their own doings may be, they are only beneficiaries of changes to the emergence of which they did not contribute anything.

"The characteristic feature of the market economy is the fact that it allots the greater part of the improvements brought about by the endeavors of the three progressive classes—those saving, those investing the capital goods, and those elaborating new methods for the employment of capital goods—to the nonprogressive majority of people. Capital accumulation exceeding the increase in population raises, on the one hand, the marginal productivity of labor and, on the other hand, cheapens the products. The market process provides the common man with the opportunity to enjoy the fruits of other peoples's achievements. It forces the three progressive classes to serve the nonprogressive majority in the best possible way.

"Everybody is free to join the ranks of the three progressive classes of a capitalist society. These classes are not closed castes. Membership in them is not a privilege conferred on the individual by a higher authority or inherited from one's ancestors. These classes are not clubs, and the "ins" have no power to keep out any newcomer. What is needed to become a capitalist, an entrepreneur, or a deviser of new technological methods is brains and will power. The heir of a wealthy man enjoys a certain advantage as he starts under more favorable conditions than others. But his task in the rivalry of the market is not easier, but sometimes even more wearisome and less remunerative than that of a newcomer. He has to reorganize his inheritance in order to adjust it to the changes in market conditions. Thus, for instance, the problems that the heir of a railroad "empire" had to face were, in the last decades, certainly knottier than those encountered by the man who started from scratch in trucking or in air transportation.

"The popular philosophy of the common man misrepresents all these facts in the most lamentable way. As John Doe sees it, all those new industries that are supplying him with amenities unknown to his father came into being by some mythical agency called progress. Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity. If any man has to be credited with what John Doe considers as the rise in the productivity of labor, then it is the man on the assembly line. Unfortunately, in this sinful world there is exploitation of man by man. Business skims the cream and leaves, as the Communist Manifesto points out, to the creator of all good things, to the manual worker, not more than "he requires for his maintenance and for the propagation of his race." Consequently, "the modern worker, instead of rising with the progress of industry, sinks deeper and deeper.... He becomes a pauper, and pauperism develops more rapidly than population and wealth." The authors of this description of capitalistic industry are praised at universities as the greatest philosophers and benefactors of mankind and their teachings are accepted with reverential awe by the millions whose homes, besides other gadgets, are equipped with radio and television sets."

Ludwig von Mises

The Anti-Capitalist Mentality

Grove City, PA: Libertarian Press, originally published 1956, p. 31-33

(h/t Sandwichman at EconoSpeak)

Emily Tess Katz — Jack Abramoff: Supreme Court Justices 'Just Don't Get' How Money Influences Politics

Former lobbyist Jack Abramoff disagrees with the Supreme Court's April 2 ruling on campaign finance limits, which knocked down the overall limits on what a donor can give to all federal candidates, political parties and PACs combined.

"I don’t believe the [Supreme Court] justices understand the connection between political money and corruption," he told HuffPost Live's Josh Zepps. "It seems that none of them were politicians and none of them were elected officials, so maybe they just don’t get it. To think that the conveying of money is not going to create a corrupt relationship, I think is naive at best."

HuffPost Live
Jack Abramoff: Supreme Court Justices 'Just Don't Get' How Money Influences Politics
Emily Tess Katz

Snowden Calls BS On Putin's Answer: Says He Was Playing The Role Of Ron Wyden (via Techdirt)

Snowden Calls BS On Putin's Answer: Says He Was Playing The Role Of Ron Wyden (via Techdirt)

Yesterday we, like many, were perplexed by Ed Snowden's decision to go on a Russian television program, and to ask Vladimir Putin a question about whether or not the Russians do mass surveillance like the NSA does (which was, of course, exposed by Ed…

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Travis Gettys — Study: Popular movements strangled by influence of the wealthy elite in Congress (via Raw Story )

Study: Popular movements strangled by influence of the wealthy elite in Congress (via Raw Story )

A forthcoming study found that ordinary citizens exert little influence on the political process, even when they form coalitions to compete against corporate interests. A co-author of the study, which will be published later this year, said he was particularly…

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Peter Radford — Capital: Piketty and such

I will not pile on any more: the Piketty book is required reading. Enough said.

What strikes me is that his data set is so comprehensive that it ought to end many of those lingering debates within economics. I doubt it will, but it ought to.

I have a few comments I want to make because of his book and the reaction to it.

Context is everything.

First: it confirms, in my mind, my argument that economic systems cannot ever be carved out of their historical, social, and political contexts. Not, at least, if the analyst wants to be left with anything at all useful. Studying economics as some abstracted other-worldly stand alone entity is entirely pointless. Pretending that everyday people act in an economic sense without reference to a whole slew of cultural, institutional or other relationships and pressures is just nonsense. Of course they do. We all know that.

I understand that distilling some uniquely “economic” regularities is useful. I understand that establishing certain cause and effects relationships can help us understand society, but, ultimately it is society we are understanding, not just some economic agents roaming about absent any other influences. So anything understood within the domain of economics must then be converted to, or fitted within, the larger picture before it is thought of as having any relevance. Particularly policy relevance.

So it is not enough to build upon micro foundations unless those foundations extend across a diverse realm that includes all the elements at the base of the society being studied. To avoid such an extension is to display an extraordinary and willful narrow mindedness.

Revisiting the Cambridge Capital Controversy

I disagree with Piketty with respect to the outcome of the so-called Cambridge or Capital controversies of the 1950′s and 60′s. He is wrong when he says that the Samuelson/Solow side won the debate. They didn’t. Indeed they acknowledged their loss. The problem is that their loss never resulted in a suitable revision of theory. They simply ignored the consequences of the loss and plowed on as if nothing had happened. The result is that despite being an epic review of capital and the role it plays in creating massive inequalities in society, Piketty’s book glosses over any detailed look at the way in which capital becomes part of the production process. It is not his intention to delve too deeply into such matters. I concur with his omission on that score, but someone, somewhere, needs to re-visit those controversies in the light of Piketty’s revelations and produce a more modern and helpful notion of capital that can then be incorporated into contemporary theory. Until the clutter is removed from around the subject of what, exactly, capital is, talking about substitution with labor is meaningless. We don’t know what is doing the substituting. Nor can we properly compute a return to capital if it remains such a slippery almost chameleon like entity. Perhaps we are afraid we will just end up realizing that returns to capital are socially constructed as some have argued all along. Such a conclusion would unravel orthodoxy at warp speed. Deservedly so.

It's really about power.

To me, both capital and labor are references to power and social relationships not to actual production inputs.

We need to rethink the factors.

Come to think of it the classical trio of Land, Labor, and Capital all need to be put aside and replaced with a more precise set of basic inputs. Energy, Primary Knowledge, Secondary Knowledge and Physical Resource are my suggested alternative. Where Primary Knowledge is that reducible into code and thus amenable to embedding in machinery; and Secondary Knowledge is that which enables adaptive reaction to novelty, and which is thus the source of future code.

Real-World Economics Review Blog
Capital: Piketty and such

Peter Radford

Mark Buchanan — How to consistently beat the market -- follow trends

Yes, "the trend is your friend," or MOMO counts, as traders know (pace EMH).

Several people working for the hedge fund AQR Capital Management have a working paper which looks at trend following strategies over about a century. It finds they're generally very profitable, which is surprising, I guess, if you're an EMH nut and simply can't muster the imagination required to believe that markets contain identifiable momentum.

The Physics of Finance
How to consistently beat the market -- follow trends
Mark Buchanan

David Siegel — Why wouldn’t people want to reduce inequality?

Formation of collective consciousness through resonance and ripples.

The Washington Post — The Monkey Cage

Why wouldn’t people want to reduce inequality?

David A. Siegel | Associate Professor of Political Science, Duke University

(h/t Mark Thoma at Economist's View)

Lars P. Syll — Thomas Piketty and fierce critiques of brilliantly silly economic models

Quotes Emily Eakin/The Chronicle Review

The French economist Thomas Piketty arrived in Washington, D.C., on Sunday for a week of talks at some of the nation’s leading policy-research centers but which might as well have been billed as a victory lap up the East Coast. The English translation of Piketty’s new book, Capital in the Twenty-first Century, a formidably rigorous, 700-page history of wealth, out barely five weeks, had just made The New York Times’s best-seller list. But even before it appeared, on the strength of a handful of advance reviews and a surge of Internet buzz, Piketty’s transformation was complete: from respected researcher on income distribution to ranking heavyweight, a scholar who, armed with reams of data and charts—and, unusual for an economist, a gilded tongue—proposed to upend decades of mainstream wisdom on inequality though an unprecedented analysis of the past.

This is a sea change in political economy.

“For far too long,” he writes, “economists have sought to define themselves in terms of their supposedly scientific methods. In fact, those methods rely on an immoderate use of mathematical models, which are frequently no more than an excuse for occupying the terrain and masking the vacuity of the content. Too much energy has been and still is being wasted on pure theoretical speculation without a clear specification of the economic facts one is trying to explain or the social and political problems one is trying to resolve.”

Translation: The emperor is naked.

Capital in the Twenty-first Century, Piketty makes clear, is his notion of what economics scholarship should look like: combining analyses of macro (growth) and micro (income distribution) issues; grounded in abundant empirical data; larded with references to sociology, history, and literature; and sparing on the math. In its scale and scope, the book evokes the foundational works of classical economics by Ricardo, Malthus, and Marx—to whose treatise on capitalism Piketty’s title alludes.

Back to the high ground.

Less likely to endure is Piketty’s remedy for inequality: a progressive global wealth tax on fortunes over 1-million euros.

In Washington, a policy town, remedies were what many of Piketty’s commentators wanted to talk about, and they tended to dismiss his proposal, while taking the opportunity to promote their own ideas instead.

The Overton window is shifting to the left after being pushed rightward for decades under neoliberalism.

Thomas Piketty and fierce critiques of brilliantly silly economic models

Lars P. Syll | Professor, Malmo University

Randy Wray — The Reality of the Present and the Challenge of the Future: Fagg Foster for the 21st Century

Here is a presentation that I’ll give today at the University of Denver at the annual J. Fagg Foster honors ceremony. Most of you will not know of Foster, but you should. While he did not publish much, he was the professor of a number of prominent institutionalists who attended DU in the early postwar period. I was lucky to have studied with his student, Marc Tool, and was introduced to Foster’s work at the very beginning of my studies of economics. My presentation below is based on two of Foster’s articles: J. Fagg Foster (1981) “Understandings and Misunderstandings of Keynesian Economics”, JEI, vol XV, No 4, p. 949-957.; and (1981) “The Reality of the Present and the Challenge of the Future”, JEI vol XV, No 4, p. 963-968. Both are from 1966, republished in a special issue of the Journal of Economic Issues, 1981. You should read them.

Economonitor — Great Leap Forward
The Reality of the Present and the Challenge of the Future: Fagg Foster for the 21st Century

L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

Michael Stephens — Minsky and Financial Reform’s “Never Ending” Struggle

In a new policy brief, Jan Kregel looks at a lesser-known, early period of Minsky’s work on financial reform. In the ’60s, Minsky was a consultant to a number of government agencies, including the Federal Reserve, on issues related to financial regulation. In this context, he came up with a new approach to bank examination, which he called “cash-flow based.” The new approach evaluated bank liquidity, not as an innate feature of a particular class of assets, but as a function of the balance sheet of the institutions under examination, the markets for those assets, the state of the macroeconomy and the financial system as a whole, and much else. In fact, as Kregel explains, what Minsky was after here was related to an early form of what we now call “macroprudential regulation.”

Multiplier Effect
Minsky and Financial Reform’s “Never Ending” Struggle
Michael Stephens

Charles Alexander Eastman (Ohiyesa) — From The Soul of the Indian

"The native American has been generally despised by his white conquerors for his poverty and simplicity. They forget, perhaps, that his religion forbade the accumulation of wealth and the enjoyment of luxury. To him, as to other single-minded men in every age and race, from Diogenes to the brothers of Saint Francis, from the Montanists to the Shakers, the love of possessions has appeared a snare, and the burdens of a complex society a source of needless peril and temptation. Furthermore, it was the rule of his life to share the fruits of his skill and success with his less fortunate brothers. Thus he kept his spirit free from the clog of pride, cupidity, or envy, and carried out, as he believed, the divine decree—a matter profoundly important to him….

"It was our belief that the love of possessions is a weakness to be overcome. Its appeal is to the material part, and if allowed its way it will in time disturb the spiritual balance of the man. Therefore the child must early learn the beauty of generosity. He is taught to give what he prizes most, and that he may taste the happiness of giving, he is made at an early age the family almoner. If a child is inclined to be grasping, or to cling to any of his little possessions, legends are related to him, telling of the contempt and disgrace falling upon the ungenerous and mean man.

"Public giving is a part of every important ceremony. It properly belongs to the celebration of birth, marriage, and death, and is observed whenever it is desired to do special honor to any person or event. Upon such occasions it is common to give to the point of utter impoverishment. The Indian in his simplicity literally gives away all that he has, to relatives, to guests of another tribe or clan, but above all to the poor and the aged, from whom he can hope for no return. Finally, the gift to the 'Great Mystery,' the religious offering, may be of little value in itself, but to the giver's own thought it should carry the meaning and reward of true sacrifice….

"The true Indian sets no price upon either his property or his labor. His generosity is only limited by his strength and ability. He regards it as an honor to be selected for a difficult or dangerous service, and would think it shame to ask for any reward, saying rather: 'Let him whom I serve express his thanks according to his own bringing up and his sense of honor!'

"Nevertheless, he recognizes rights in property. To steal from one of his own tribe would be indeed disgrace, and if discovered, the name of 'Wamanon,' or Thief, is fixed upon him forever as an unalterable stigma. The only exception to the rule is in the case of food, which is always free to the hungry if there is none by to offer it. Other protection than the moral law there could not be in an Indian community, where there were neither locks nor doors, and everything was open and easy of access to all comers...."

THE SOUL OF THE INDIAN 
An Interpretation
By Charles Alexander Eastman (Ohiyesa)

(excerpted from section IV)

Project Gutenberg

Jared Bernstein — Rents, Rents, Everywhere Rents!

Cue "economic rent." Until a few days ago it was politically incorrect for economists to mention rents and rent-seeking, and it would get you associated with heterodoxy if not Marxism. One of the few talking about it was Michael Hudson.

On the Economy

Rents, Rents, Everywhere Rents!
Jared Bernstein

Michael Hudson — Obama channeling Cheney?

Michael Hudson interviewed about the Ukraine.

Michael Hudson
Obama channeling Cheney?
Interview by Jessica Desvarieux of the Real News Network

My journey to trading success and why the mental game is everything. And introducing, "Norman's Law."

I have been trading for 35 years. I've been a member of four exchanges, a floor trader, prop trader for a major international bank, commodity trading advisor, trader for a major hedge fund and all around money manager.

With all this experience I can tell you positively, unequivocally, that the secret to successful trading is mental. One hundred percent mental. No systems, no charts, no quants, no algorithms...just mental. Once you understand that; once you can master the YOU in trading, you can trade pretty much continuously with uninterrupted profitability.

So why don't people do it?

AP — Harry Reid Calls Backers Of Nevada Ranchers 'Domestic Terrorists'

Senate Majority Leader Harry Reid is calling armed backers of a Nevada rancher "domestic terrorists" for using guns in a grazing rights battle with the federal Bureau of Land Management....

Reid says a federal task force is being formed to resolve the dispute.

The Huffington Post

Harry Reid Calls Backers Of Nevada Ranchers 'Domestic Terrorists'

Associated Press

Steve Roth — The Global “Capital” Glut

What Bain capital has to say about the global capital glut.

So what about Bain Capital, Romney’s shop? Here from their December 10, 2012 report (PDF; hat tip to the always-remarkable Izabella Kaminska, and to Climateer Investing).

World awash in nearly one quadrillion of cheap capital by end of decade, according to new Bain & Company report
Their takeaways include:

The capital glut will be accompanied by persistently low real interest rates, high volatility and thin real rates of return. 

Sound like secular stagnation to you?

 Also:

The ever-present danger of asset inflation will contribute to an overall steepening of the investment risk curve… companies will need to strengthen their bubble-detection capabilities

In short, there’s a huge amount of money floating around out there relative to income and production. (In Steve World, all financial assets embody money, and the money stock is the total value of financial assets — including dollar bills, deeds, or other formal financial claims — regardless of how currency-like those things are. Equating currency and currency-like things with money is conceptually incoherent.)

This is an excerpt. If this is your interest, read the whole thing and follow the link at the end.

Hint: it’s about what the herd does with all that money.

Asymptosis
The Global “Capital” Glut

Steve Roth