Goldman CEO, Lloyd Blankfein, in another of his long list of memorable statements ("We do God's work") just came up with a new one today. When speaking of the fiscal cliff with CNBC’s Steve Liesman (see Matt Franko's previous post), he warned that we need to take steps to avoid going over the cliff.
Blankfein authoritatively said that his firm “advised people on things like fiscal cliffs.” Well what kind of advice would that be, Lloyd? Why is it that you and other financial executives (Jamie Dimon, Brian Moynihan, Larry Fink, Bill Ackman and others) are listening to the fake crisis clown show of people like Erskine Bowles and Alan Simpson, who are demanding their own version of a fiscal cliff to “solve” the fiscal cliff? They’re pushing for American brand austerity.
If these people are so smart how come they don’t see that these measures, now being employed in Europe, have had disastrous consequences and have not eradicated deficits, but instead, have led to massive unemployment and ongoing recession? This is their prescription for avoiding bad times? Sounds like the medicine is worse than whatever purported illness we have.
11 comments:
Bowles: "as long as we have this enormous debt overhang, then we are not going to have the resources to invest in things like education...."
LOL!
Mike,
Why didnt they just invite Peter Schiff?
This is embarrassing...
Capitalism is inherently unstable and subject to cycles, both industrial and financial. Industrial cycles lead to recessions but financial cycles lead to depressions. The world is in the grip of a depression now due to the culmination of a long financial cycle that has resulted in the buildup of excessive private debt.
The delevering process must run its course and it can do so either through deflation (wage suppression) that favors the bankers, reflation which favors debtors, or Keynesianism which increases the weight of government, which runs counter to neoliberalism. Or a jubilee like Steve Keen and Michael Hudson recommend, which is worse than default for creditors since they loose claims on debtor assets.
So TPTB are enforcing "austerity," i.e., wage-benefit suppression as their preferred option.
This has a way to run and TPTB will use the crisis as an opportunity to practice "disaster capitalism" by making hay with it. They have the US public (rubes) largely on board so far, and there is no real alternative in the coming election. Both parties are controlled by the Establishment faction, since they get the funding from the big donors, who fund the Establishment because they are the Establishment.
Tom,
"The delevering process must run its course and it can do so either through deflation (wage suppression) that favors the bankers"
Why? Can you elaborate on that argument? Seems to me rational bankers could favor a form of Keynesianim based on tax cuts, that would stimulate the economy without increasing the size of government.
More like creating the fiscal cliffs for all in their path:
"How the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece"
http://www.rollingstone.com/politics/news/looting-main-street-20100331
Tax cuts? The wealthy already have the Bush tax cuts, and paying off, I mean making legal contributions to PACS in order to keep them.
Why? Can you elaborate on that argument? Seems to me rational bankers could favor a form of Keynesianim based on tax cuts, that would stimulate the economy without increasing the size of government.
That the deal being proposed in the US. Taxes only on work, no tax on inheritance and capital gains, and a huge expansion of military spending with deep cuts in social spending. That's the neoliberal agenda. Romney has refused to reveal what his actual plan is because he admits that if he did no one would vote for him.
This has to be seen in the context of what's going on geopolitically and geo-strategically. Anyway, what's really going on in the world today from the side of the US is that the neocons are trying to foment WWIII, which are sure the US can win, finance capital is planning a reset of the international monetary system and global finance under the control of Western finance, and the Western multinationals are setting it as an objective to dominate global industrial capital. The military and domestic security are key players in this scenario that melds US economic power (most developed economy) and military might (world's only superpower) to achieve and maintain US hegemony under Western finance and industrial capital through capture of the political process. This can only succeed in a democratic environment by duping the rubes and TPTB commit enormous resources to doing this.
"based on tax cuts,"
Tax cuts on people making less than 250k/year maybe.
The ones on the table will just make things worse.
Jose,
" rational bankers"
They could make more "money" if they were not morons....
I recall seeing Pete Peterson, the ring leader of all of this fantasy fiscal phobia imo, on a Charlie Rose show interview.
Peterson was head of the Private Equity firm Blackstone Group and Blackstone OWNED a medical diagnostics imaging company, but while speaking to Charlie Rose about the US debt and Medicare, he said "America does too many MRIs, back when I was young, we used to just take an aspirin"... completely against his own (AND HIS SHAREHOLDERS) financial interests... what a moron.
You see this a lot, morons making statements that are completely against their financial interests.... and another thing you see is that they give up large amounts of funds (they are not greedy) to advocacy groups to support their campaigns to disseminate falsehoods... Peterson has GIVEN AWAY $1B to support dissemination of these falsehoods
http://www.forbes.com/sites/schifrin/2012/09/18/peter-peterson-a-billion-dollars-to-restore-the-american-dream/
That is what we are up against, billionaire morons...
rsp,
Matt,
Perhaps this is just another illustration of the Kalecki paradox: capitalists preferring lower profits with a submissive population to higher profits with a full-employed, self-confident working class.
Perhaps this is just another illustration of the Kalecki paradox: capitalists preferring lower profits with a submissive population to higher profits with a full-employed, self-confident working class.
A lot of the difficulty that educated people have in understanding the dynamic lies in their taking the participants to be rational human beings, whereas the ruling elite is constituted of alpha baboons and the workers are the submissive males, along with the submissive females.
It's aso why most men have a difficult time "understanding" women. Men and women have different evolutionary traits, so their strategies differ.
This is all pretty straightforward from the evolutionary perspective, and it's all very logical from this perspective. Context shifts but not millions of years in the making traits.
Matt they would increase income, but there is other way they can increase their wealth.
Let's see, we have this:
- Income, and share of total income in the economy. If total income does not increase (new money being poured into the economy) your monetary wealth is not increasing relatively to others unless you are gaining share of the total income (taking it from others). This can't be done in a capitalist economy in a sustained way, not all "capitalists" can win at the same time, and this is the principle that drives competition and 'darwinian selection' in corporate world. But when taken to the extreme of stagnant (or reducing) income even biggest capitalists start to feel trouble, so it's not a sustainable strategy.
- Accumulated wealth (or hoarding behaviour). As your income increases you can hoard financial wealth, or can use it to acquire physical wealth (acquiring assets). In a world where income is being reduced in aggregate (or stagnating), as I said, hoarding can become a real problem for capitalist class because they predate each other. So you try to keep our income stable, while reducing non-capitalists (and petty capitalists) classes share of income. As people is forced to liquidate assets to keep a high enough stream of money to maintain their consumption habits and necessities, a favoured capitalist which is holding their relative purchasing power, con acquire these assets. So they in fact are increasing their wealth using this strategy (vulture capitalism), but as said before we know this is not sustainable in the long term.
We see maximizing aggregate income and maximizing acquisitions are two sides of the spectrum as ways to increase total wealth for capitalists. We know one is sustainable while other is not as would induce societal collapse if taken to the extreme (revolution, war, etc.).
The biggest difference, amongst others, is the effect on the price level of assets IMO. Soi you can use the second strategy to maximize wealth while keeping price levels in check (or even diminishing), it has a deflationary bias. So you are increasing wealth not only by increasing both acquisitions and income RELATIVE to others, but your purchasing power is increasing over time. Only when the situation to the status quo is endangered this strategy is worse than the strategy of increasing income in aggregate; this is when historically the dominant class has used institutions and power to 'fix' the situation and made some compromises, when things got 'too bad'. OFC the fixing can involve more repression for example, this is a 'revolution' from the dominant class to maintain the status quo, if the situation got bad enough.
So yes, alpha males at the top may not care much about long term sustainability and are as short sighted as the majority of humans, but is possible to go with this strategy of increasing RELATIVE wealth and power; even if at aggregate level everybody is losing.
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