Oh my, the debate over who saw the crisis coming spills over to Asia Times Online. Probably not much you haven't seen already.
But the story is getting legs rather than going away as the elites of the world hope it will and are doing their best to bury it, because it shows that their brand of "capitalism" (neoliberalism) isn't working and some people have shown why.
Being the journalist he is, Schall is digging in. Which is supposed to be what journalism is about, isn't it? In the US we have propagandists rather than journalists. Unfortunately, however, Schall is associated with the bonkers school of economic otherwise.
Asia Times Online
Who saw the economic crisis coming and why?
Lars Schall | German financial journalist
Asia Times Online
Who saw the economic crisis coming and why?
Lars Schall | German financial journalist
12 comments:
We know Peter Schiff saw it coming. Not only did Mike Norman not see it coming, he mocked Schiff's correct prediction on national TV.
http://www.youtube.com/watch?v=1G0tfb8ZefA
In addition, I asked him: ''Can you elaborate for the readers of Asia Times Online a bit on what you've pointed out as 'the most important thing in capitalism', please?''
[Keen] answered: ''If I can interpret that question as 'the most important thing about capitalism that most economists don't understand', it would be 'that banks are not merely passive warehouses for storing money, but actively produce money, and can destabilize capitalism if they do this badly - which, left to their own devices, they always do."
"[B]anks are not merely passive warehouses for storing money, but actively produce money, and can destabilize capitalism if they do this badly - which, left to their own devices, they always do."
Wrong. Banks or governments or anyone "actively producing money" is always a bad thing and will always destabilize society by distorting the price, investment and capital structure. And such a funny money regime should not be called "capitalism".
Oops. The physicist Hansen did not read Marx and Schumpeter. Both talk about destructive creation, new companies and sectors of the economy which destroy the old (digital photography...). And not about creative destruction, like the neo classicals - in a market socieity where companies can go bankrupt you don't have to liquidate the old stuff before new developments can take place.
Additional remark: which of course means that as a historical fact the rejuvenating of out economies takes place during the booms, not the slumps.
Merijn Knibbe said...
Additional remark: which of course means that as a historical fact the rejuvenating of out economies takes place during the booms, not the slumps.
Key point. The important thing is innovation rather than liquidation of malinvestment, and the incentive to innovate comes from demand — "find a need ad fill it or create and want and meet it." Again a failure to understand how firms actually operate in terms of product development and expansion of markets and market share.
Economists really need to study up not only on money & banking and finance but also on business management, as well as keep abreast of social science, instead of making stuff up to suit an ideology.
The important thing is innovation rather than liquidation of malinvestment
The actual goods and capital don't "liquidate" to a puddle of chocolate syrup. They are sold for what someone will pay for them. Further, government lacks the knowledge to know what to do with these resources.
It's you Keynesians who are obsessed with prices. You don't like the prices being paid for stuff (which can be painful due prior funny money dilution/inflation/deflation). So you keep trying to interfere with the economic actors and you insist upon your own anointed distorted pricing via more funny money because (according to you) you are smarter than everyone else.
The actual goods and capital don't "liquidate" to a puddle of chocolate syrup. They are sold for what someone will pay for them.
Bob, you are just spouting ideological drivel. You and the economists you believe in were never in business and don't know the first thing about how business works. You live in a fantasy world of your own making, with an idealized model of how resources flow from one use to another frictionlessly. Guess what, there is a lot more friction in the system than you guys suspect or allow for. If your model were correct, then there would be no issues involved with "liquidate, liquidate, liquidate." But there are huge issues due to the friction involved and it can take years to dissipate the heat, after it has burnt those close to it to a crisp.
The gold-bug talks of "funny money"?
Here's just one "funny" thing about commodity money: If used as money it ceases to be a commodity and if used as a commodity it ceases to be money.
Tom, you are just spouting ideological drivel.
Stuff does not turn to liquid when sold for less than what you have deemed in your anointedness to be the proper price. Further, there is no "friction" nor "heat" involved in voluntary human exchanges unless and until people are actually and physically rubbing up against each other.
Further, in business, if you don't have things people want to buy at the prices they will pay, you go out of business, right? What am I missing?
Bob, when businesses go under not only are a lot of people in the employment line, perhaps for some time, but also a lot of the resources end up in the trash heap or given to charity because of the transaction cost involved in repurposing them. Even specialized capital goods that are not easily repurposed are often unusable. What gets sold off and repurposed quickly are capital goods with more universal application, like milling machines, but in an economic contraction, there are piles of these goods in warehouses going without buyers who can put them to use profitably at the time, so they just sit there. Same with factories and stores. Eventually, usable stuff is repurposed and most people find comparable jobs, but not all, even in the long run. The result is a lot of capital destruction, most of which could have been avoided by supplementing effective demand to break the fall.
I have lived through several contractions and seen this close-up. That's why I am surprised when theorists assume minimum friction. The transaction costs alone are substantial, even in minor contractions when things get sorted out relatively quickly.
I just don't get the paranoia about governmental economic policy as "central planning," when the largest firms use carefully devised strategic planning as a management tool, as have the militaries of the world for millennia and which is where organizational theory comes from in the first place.
Most economists seem to be clueless about organizational and institutional matters, as if anyone who is successfully relies on the invisible hand rather than careful use of information, planning, decision making and the like in terms of organizational and institutional arrangements that are rule-based using tested rules. It's called "management science" and they teach it at technical universities like MIT and RPI as an off-shoot of engineering rather than economics.
Even specific investment that are not quickly repurposed are often useless. What gets marketed off and repurposed quickly are investment products with more worldwide program.
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