Wednesday, December 1, 2010
If this is capitalism, who needs it!
Capitalism is best? For whom?
In this country we hear the constant cheering for capitalism, even by people who, amazingly, have lost their jobs or are struggling. Yet, if some of them just simply took a break from all that cheering and focused in on what has really been going on I wonder if they'd be so enthusiastic about picking up the pom poms.
Here's a snapshot of capitalistic America without the blinders of ideological rhetoric.
After tax corporate profits are currently at an all-time record high above $1.4T. In the past two years alone, profis have zoomed up by $800 bln.
Yet the nation's economy is limping along at barely 2.0% growth--well below our capabilies--and unemployment is at 9.6%, up from 5.0% just two years ago even though profits have grown by the better part of $1 trillion.
The stock market is 14% below its 2008 peak and 20% below its all-time high so stock investors have not been rewarded by this capitalist explosion.
Dividends are down by $150 billion in that time, meaning that yet again, investors have not been rewarded.
Real earnings of workers are lower now than they were in 2008 and still below the level they were in 1968 on an inflation adjusted basis!
In the past 10 years corporate profits have increased by 174% and the unemployment rate has INCREASED by 144%
So, where's all the money going? To salaries and bonuses for a small percentage of people at the top.
That's capitalism. Nice system, huh?
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25 comments:
Mike,
That's not capitalism. That's corporatism. There was a huge number of people calling for bailing out corporate interests, you included. That's not capitalism, but cronyism. If its too big to fail, you will get more of it. There is nothing surprising here.
Can anyone comment on the Fed's bailing out of the entire world back in 2008 ?
http://www.nytimes.com/2010/12/02/business/economy/02fed.html?_r=1&hp
Looks like that "crass keynesian economics" the German finance minister declared the USA was at fault in engaging saved the very Austrian Economic nuts that complain.
But's ok to look or shoot the gift horse that saves your butt.
Can anyone here model what would have happened if the Fed did not provide the support in the commercial paper market ?
dollar to euro @ 3:1 ?
world wide bank failure closures?
war ?
satellites falling to earth?
babies' neonatal cribs being unplugged due to cost ?
oil at $10 a barrel ?
Yes, this would have happened and it would be all in the name of "austrian schooled creative destruction" !
These republicans would have called it "creative destruction" but the other name is "KristalNacht Part II : everyone goes down "
See, I told you - Austrian Economics school is as over as BizRadio and all those nit-wits.
The real estate VULTURES on BizRadio are really sad that they are not gobbling up people's foreclosed homes since there really are not that many as expected due to stop gap measures which should be expanded along with measures to make Jobs.
And this is where Peter Schiff is TOTALLY FALACIOUSLY being represented by his so-called "fans" :
If Mr Schiff is sooooo accurate regarding the market, why did he call the market and sound the horn while simultaneously calling for Austrian creative destruction as well as telling people to leave the dollar ?
That's a triple Tsunami and bad advice - first get hit by the dollar spike in late 2008, then allow all the businesses to fail ... all the while sounding the alarm like a primadonna genius ?
It doesn't add up.
Mike Norman and Warren Mosler do add up though they are not calling the market in the same way.
Mr Marty
You are like all the other posers that do not look at where Mike Norman points but rather look at his finger.
Nobody's finger is perfect and you can request a pedicure at a later date.
Norman is making the point that capitalism aka corporatism is all that is espoused and the call for job creation and adding fundementally to the economy by monetary in-paradigm measures while elliminating the speculators who do nothing to bolster the USA is called forth.
THE BRITISH NIGEL FARAGE IS A LOAD OF GAR-BAGE IN THE GAR-AGE ..
----------------------
THIS NIGEL GUY IS A CREATIVE DESTRUCTIONIST.
BAILOUTS = BAD NEWS
THIS IS OUT OF PARADIGM.
HE'S A DEFICIT TERRORIST, PROCLAIMING THAT DEMOCRACY AND LIBERTY ARE AT STAKE BUT HE'LL LET EVERYONE GO DOWN THE TUBE WITH HIS CRASS AUSTRIAN DESTRUCTIONISM.
THE EURO STATES SHOULD NOT BE ALLOWED TO LEAVE JUST AS MUCH AS CALIFORNIA OR TEXAS ARE ALLOWED TO LEAVE THE FEDERAL UNION OF THE USA.
THE COUNTRIES LIKE THE PIIGS NEED TO BEHAVE LIKE STATES IF THEY WANT THE AMENITIES THE EURO HAVE BROUGHT OR HAVE NOT.
@google,
I'm not looking at Mike Norman's fingers. I am just reporting Mike Norman's call for action, and its consequences.
Nice comments Mike
We don't have a free market economy. We have a mixed economy with much socialism and corporatism interjected. It's just a cocktail of crony capitalism and state collectivism. It has been this way for many generations.
If you want to understand why the yawning gap between rich and poor has widened greatly over the last 20 years and is widening still more under the new administration then look no further than the Federal Reserve system. The cheap money policy of the Fed has rewarded the financial services industry (Mike Norman's professional sector) by handing out cheap money--a subsidy in other words--to this sector. The financial services sector would not be 14% of the American economy without a centrally planned fiat monetary system that rewards politically connected money managers. I don't think this is by deliberate design, but, rather, the cheap money policy is designed to keep our debt-based consumer economy going.
Many of you are misidentifying the source of the disease, so your cures are the equivalent of bleeding the patient.
Googleheim,
The German finance minister is not an adherent of Austrian economics. Also, if the "Fed saved the world" then why is Europe in the middle of a debt crisis right now? Oh, it would have been worse without the bailouts, right? That is how the fable is being told at any rate. I am glad to see that you recognize that Nigel Farage isn't one of you guys though. Some of the others were confused about this.
"Capitalism" says it all. Capital is favored over the other factors of production, and wages (price of labor) are treated as a commodity price along with others.
What does anyone think is going to happen in a system like that other than exploitation of "lesser" means of production. This is why workers are known as "the little people," and the environment is considered dispensable.
Tom,
Thank you for unwittingly proving my point about misidentifying the economic system that we suffer under. I can call that hat on top of your head in the picture next to your screen name a beachball all day long, but it doesn't make it so. You guys just identify any economic activity that you don't like as capitalism.
Anyone who even remotely claims this is Capitalism? Has never read ONE work by Adam Smith.
Secondly, if people can't make money in THIS market of all markets?
Then people are just ... hopeless.
This is some of the easiest money ever made.
The world just narrowly escaped going back to the bread and soup lines of 1934 era, and people just can't seem to shutup and stop whining.
I cannot abide whiners.
When did 'toughness' stop being admired as an admirable quality?
Good god people are such babies.
D
Marty,
Mike wasnt calling for "bailouts", he was calling for the govt to intervene appropriately (a is their mandate) so as to avoid unnecessary disruptions to the economy in general.
Detestable Henry Paulon letting Lehman go to bankruptcy was the height of this dereliction of duty.
If Paulson would have just appropriately intervened with Lehman (up to including govt resolution if necessary) and Congress would have comensurately maintained a strong fiscal policy, I firmly believe we could have avoided 90% of all of this crap .
This is all the government's fault.
Mike,
I would add that currently, 50B of the 110B per month deficit is going to the external sector, almost half of the current fiscal defict (and lets face it, the political 'capital' it uses) is going offshore...this is a major part of the problem imo, all OPEC and China (about 25B each), f them both imo, but govt is not addresssing this so these 2 external entities are prospering.
It is my opinion that if capitalism ultimately leads to corporatism then there is no difference between the two.
Austrian economics is a pseudo-science like dianetics or creation science. It refuses to use statistics and figures and many of its supporters do it for money. If you read or study Mises founder Lew Rockwell one can see all the signs of a self-conscious fraud. Anybody who would one day write smears about Martin Luther King and then the next praise him tells me everything I need to know about him. Lets not forget the fact that he even encouraged Americans to renounce their citizenship but won't take part in it.
Spotics,
Free markets don't have to lead inexorably to corporatism. The political capitalists are very smart in that they always sell subsidies, mandates, public-private partnerships, favored regulations, etc. in terms that they think a largely gullible public will swallow whole--for the children, safety, competitive playing field, etc.
The government must be stripped of its powers to manage interest rates; create financial bubbles with cheap money; hand out subsidies and favorable regulations; engage in public-private parterhsips; and create mandates that are nearly always the brainchild of some corporate interest.
If government creates a system whereby the ablest at acquiring pull and favors are rewarded then don't be surprised when interest factions seek government favor. Many people imagine that more regulations are the answer, but that will only spawn more lobbyists. When the regulatory shit pile grows, the lobbyist flies increase in number.
ban lobbyists!!!!!
the house of representative is ENOUGH for the "people's voice" to be heard.
businesses ARE NOT citizens and should literally have NOTHING TO DO with our government. That supreme court ruling is beyond destructive to our constitution and I am very shocked and saddened to see it even passed. It should not be and business should be separate from government as much as religion is separate from government.
If the government needs some kind of service (like construction workers, planes built, security, etc.) sure they can outsource within a FREE MARKET where the government just becomes one more customer and business competition still reigns. Other than that...NO RELATION between business and government...as soon as you go down that road...good bye prosperity and equality for all. I personally think we need to be looking more at the government BEAURACRATS who didn't STAND UP and refuse to be bought out and bribed by businesses and dirty money.
Personally I am not against the Fed as it stands now. The Fed can actually still exist as it is AND still have business and government separated. At least imo.
Matt, I'm diverging from your view on this one. Let Lehman fail. Let all of 'big finance' fail (Austrians are right on that one). Shouldn't have given any money to Europe. Stop pegging loans to LIBOR. Ensure all FDIC deposits -unlimited- and bailing out of money markets was ok. Should have created and employer of last resort program to get people off of unemployment and a payroll tax holiday so people can de-leverage faster.
If Paulson would have just appropriately intervened with Lehman (up to including govt resolution if necessary) and Congress would have comensurately maintained a strong fiscal policy, I firmly believe we could have avoided 90% of all of this crap .
This is all the government's fault.
bubbleRefuge,
This is all the government's fault.
You have arrived at the correct conclusion but for the wrong reasons.
JC,
I agree if Lehman was shown to be insovlent, that they should have been liquidated.
But to go over this at the time per my understanding: Lehman was not a "bank" but rather a Broker/Dealer and a Primary Dealer of US Govt Securities (both heavily regulated entities in their own right).
They were involved in finance and were "funded" thru short term paper. At some point "the street" lost their trust in Lehman and refused to lend to them and they lost their "funding", they couldnt 'roll it all over'. So at that point it was either the govt lend to them or they had to declare bankruptcy. At that point Paulson should have gotten together with Bernanke and got the Fed to lend to them against what would just normally be considered good collateral for any bank going to the Fed. Now also at that point they could have sent in govt people to audit and if Lehman was bust, the govt could have shut them down in an orderly liquidation, wiped out shareholders and then on into bondholders if necesary. This would have been much more orderly than the chaos that ensued because of the bankruptcy, this is why we have a Fed.
It says in Section 13(3) of the Federal Reserve Act "In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange for an individual, partnership, or corporation the Federal reserve bank shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe."
This is the section of the FRA that they eventually invoked to temp lend literally to "the world" almost $2T via the alphabet soup of special liquididty programs that they had to come with due to their incompetent F-Up with the Lehman situation to begin with. When you let a systemically important institution like Lehman just go to a plain bankruptcy, nobody will lend to anybody and the whole system just shuts down, Central Banks were invented to prevent just this type of thing.
Mike went over these options on his radio show at the time, he would have Warren on and they would lay out a plan of action for the govt right on the air.. It should have been straight forward slam dunk.
Both Paulson and Bernanke were incompetent to hold the positions that they held at the time, Paulson chronicled in his book how he had dry heaves at work and in a sissy way, had to call his wife at home to cry to her and they prayed over the cell phone lacking any coherent plan. The situation really hasnt changed much with the current govt crew imo, but I think Bernanke is a bit smarter at least in these type of matters.
Resp,
Matt, thanks for the info. Lehman held a large amount of subprime mortgage paper along with Bear Sterns and this is why they were among the first investment banks to come under distress. They were over-leveraged and their bank capital diminished as the value of their sub-prime mortgage based assets went down a black hole. They deserved to go bankrupt. However, as Warren Mosler says, Banks should not be disciplined on the liability side which I interpret as the Fed should provide unlimited funds to banks when it comes to assisting banks in meeting their liabilities ( customer deposits for example). "Big Finance" is a vampire-squid and the financial crisis should have wiped all of them out. They used their political clout to change the accounting rules and looted the FED and treasury so they could stay in business and maintain their absurd profits and payrolls.
JC,
yes, if they had to lend to Lehman, then that gave them justification to go in and determine why they coulnt get funded by the non-govt secotr. that would have maybe shown how the sub prime stuff they had contained fraudulent data and then they could have assessed whether they wre solvent etc...
that's also how I interpret "the liabilty side of banking etc.."
yes normal people shouldnt have to do due diligence for these types of things, thats (supposed) to be regulators jobs.
Yes, while the non-capitalist economies like Venezuela, Cuba, North Korea etc are just booming...
Unfettered capitalism leads to corporate monopolies. Unfettered government leads to tyranny. It's all about balance.
Hi Matt and Mike :
Looks like you could open a whole series of posts or an entire blog about the Death Panel ramifications of Republican Austerity - that is Federal level Austerity as well as state level :
a. the Collins column at NY Time about the Arizona austerity driven Death Panel revoking a liver transplant.
b. the Oregon timber counties not being paid by Federal and state channels - google :
"Oregon timber counties face financial collapse"
c. the Tennessee fire department letting the houses burn
All Austrianism coming.
KristalNacht Part II : Everyone goes down ... not necessarily at the same time.
Googleheim,
Federal and state governments are doing exactly the oposite of what free market advocates propose. Where do you imagine that money for all of this government spending is supposed to come from? All government can do is take from one citizen to give to another citizen. Governments can't wave a magic wand and create productivity, savings, capital investment, and wealth.
The social welfare state model is collapsing all over the world. Are you going to sit there and seriously say that the economic system that free market advocates prescribe is in place in any country in Europe or the U.S.? It's your ideas that are failing the world over. Federal government spending has skyrocketed over the last 3 years. Where is this shrinking government that you see that no one else does?
Red Rock,
Those are totalitarian dictatorships. Nobody's suggesting that. Try Sweden, Norway, France, even Japan.
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