The notion of a two-track economy seems to be taking hold. We kicked the concept around pretty well last week — your 130 comments (as of this morning) helped clarify a great deal of what we know, don’t know, and need to worry about. The two-track concept overlaps with, and builds on, long-standing issues of inequality in the U.S., but it’s also different. Within existing income classes, some people find themselves in relatively good shape and others are completely hammered.
New dimensions of differentiation are also taking hold within occupations and within industries – the WSJ this morning has nice illustrations. The contours of this differentiation begin to shape our recovery or, if you prefer, who recovers and who does not – it’s hard to say how this will play out in conventional aggregate statistics, but these are likely to become increasingly misleading.
For now, I would highlight three points about the two-track future for banks – partly because this matters politically, and partly of the way it impacts the rest of the process.
- The remaining big banks have become bigger and more powerful economically — the Washington Post emphasized deposits yesterday; good point, but only part of the picture. The Financial Roundtable is tickled pink about the government’s “reform” proposals (except the consumer protection part), with good reason.
- Many smaller banks are getting squeezed – as reflected in the latest news on the FDIC’s “danger/sick list”. The smaller banks really do not seem to understand how they have been done in by the big banks – if they did get it, they’d be up on Capitol Hill and all over the media arguing strenuously for much tougher controls on bad big bank behavior. The lack of leadership among non-large banks is remarkable.
- The WSJ today has the data: borrowing costs for large banks are now lower than for small banks. This is, of course, a direct reflection of the government’s firefighting/firesetting strategy: unlimited cheap resources for large big banks; for small banks, not so much.
So now it’s all about whether you are a preferred client of Goldman Sachs or another big finance house.
If you’re on the inside track, this is a great time to buy US assets that are being dumped by people without access to cheap credit, or assets overseas (e.g., Asia, where the “carry” or interest rate differential relative to the Federal Reserve is already positive and the exchange rate risk is all upside).
If you’re on the outside track, you are experiencing a version of Naomi Klein’s “Shock Doctrine”. Some (former) members of the elite are in this category – this is another standard feature of emerging market crises and “recoveries”. But mostly, of course, it’s nonelite on the outside track and a more concentrated, reconfigured version of the elite on the inside.
This can lead to short-term growth – the speed of recovery in many emerging markets surprises many, from about 12 months after the crisis breaks. But it also leads to repeated crisis, to derailed growth, and to a loss of income, status, and prospects for most of society.
By Simon Johnson
167 thoughts on “More On The Two-Track Economy — From The WSJ And Others”
The problem is not in funding big corporations. Problems is in funding unhealthy corporations, which should and must go bankrupt.
Can you elaborate specifically on “the exchange rate risk is all upside” in the larger phrase “e.g., Asia, where the “carry” or interest rate differential relative to the Federal Reserve is already positive and the exchange rate risk is all upside”?
How bleak and horrible the prospect is. It sure is the shock treatment. Everything Simon has written on this is correct. The term banana republic, heard more and more especially since Katrina, is no joke. It’s precise.
But Americans are going to insist on their zombie first-world middle-class delusion. They’d rather sink into poverty with only that delusion to keep them warm, than brave the bracing wind of cold reality in order to try to take action to actually recover what’s supposed to be their country.
As for the small banks, the last time that was written here I argued they’re probably worried that any ostensible new regulation would probably end up being hijacked for the benefit of the big banks.
While I still think that’s a plausible outcome with the Congress and “regulators”, it’s also true that they could try to go over the head of the political structure and right to the people. Simon refers to the media, who I suppose might be in play to some extent, though so far they too have mostly shilled for the TBTF ideology.
I guess by now I’m frustrated at how the only sane and angry expression on this subject is limited almost completely to the blogosphere.
Why were there never any of these protests against the bailouts? It seems like, as hostile as so many people are to this (and to so many other things), no one has any will to try to do anything about it. The only action has been from the astroturfs (if I recall correctly, the “teabaggers” first arose not in response to bank bailouts but to proposed mortgage mods). It’s all calibrated to show the masses the semblance of protest and give them plausible-sounding slogans even as the focus in every case is against the public and in favor of the very corporations already plundering the public. I don’t know what’s more sickening, the evil of the manipulators or the gullibility of the public.
Oh well, they’re being shocked.
We have invested huge amounts of capital to prop up “too big to fail” companies that led us to the brink of catastrophe. ALL of us outside of Wall Street have seen an exceptionally poor return on that investment – but those at the TBTF firms are on track for record bonuses. And the firms have grown even bigger, making government support and federal financing a permanent fixture in our economy.
At my end-of-summer block party last week, in two of ten homes, the primary wage earners have become unemployed this summer (both middle managers dropped from Fortune 500 firms hard hit by the recession.) A family around the corner (not included in this particular small block party) is also experiencing the woes of unemployment.
These are hardworking, college educated people. But not Goldman Sachs clients. So they’re irrelevant to the policy makers. We all know that too. And wonder how our nation will survive the “jobless recovery.”
At some point, policy makers will have to realize that the financial sector is not the economy, and that the money it is sucking up is not a productive use of our national funds.
At some point, policy makers will have to realize that the financial sector is not the economy, and that the money it is sucking up is not a productive use of our national funds.
I believe some of them will realize this in their retirements. In the meantime, keep electing them for life!
The term banana republic, heard more and more especially since Katrina, is no joke. It’s precise.
Actually, banana republics have bananas. Perhaps, yours would be a derivatives republic?
I think it has to do with the fact that the current exchange rates require constant intervention by the asian country’s central banks to prevent their currency from appreciating. Someone please correct me if I’m wrong.
Please tell me you are not serious about recommending Naomi Klein …
I’ve followed her book promo quite closely and was shocked at the pure demagoguery
The policy makers will not realize it while the rest of the Treasury-buying world (ie China) continues to loan money to finance our debt-addicted, crack habit spending ways. When the world wakes up to that fact (and here I proscribe to the tipping-point theory), the gig will be up, interest rate control, inflation and dollar collapse will hit us accross the board…. at that point finger pointing will be useless, and The End of The American Century will come to a most startling finish.
Other than that, I think we have things pretty well under control…yay for the greenshoots!!
Do you other objections aside from the fact it appeals to the demos?
Another way of looking at the two track economy- those who are tied to government or have great influence of government have severely tilted the playing field to benefit themselves and have left the rest of us to survive on the leftovers of their feasting. It is just not the financial oligarchs, but the lawyers, the politicians and their staffs, the government employees, particularly the public employee unions, the farmers, the Seniors, the lobbyists, the quasi-public foundations, the Universities, the insurance industry, the defense and other public works contractors and all those who regularly feed at the public trough.
Not only are individuals in these favored sectors substantially overpaid, but many of these industries, particularly the lawyers and the financial services industry have rigged our regulatory system to make their roles almost indispensable in the workings of everyday commercial life.
The problem with a highly regulated economy like ours with our all too often opaque, decision making process, is that those who have undue influence on the regulatory process will over time garner substantially more than their share of our economies’ rewards. That is just how system is working now. Plus, this undue influence is essentially an enormous tax on productive work, which makes the cost to the public of ordinary commercial services and products much more expensive than they ought to be. Real Growth and the true cost of living has declined dramatically as a result. This is what has happened to our economy.
The political influence of the favored interest groups have warped our social welfare state and regulatory structure to produce this two track economy. Until the excesses of the favored interest groups are addressed, the phenomenon of the
two track economy will only become more pronounced.
The increased consolidation within the financial industry makes financial “reform” one big catch-22; this is what your arguments for consumer protection overlook.
What are regulators going to do when these institutions misbehave? Fine them? They can’t fine these insitutions a meaningful amount (read: an amount that makes misbehaving something more than a mere cost of doing business) because that will cut into their profitability. And what is good for the profitability of the institutions that issue 2/3 of the credit cards in the country and 1/2 of the mortgages is good for the country, right?
On the other hand, if they do not find a way to discipline the big players in the system, they are just going to act to increase their share of whatever is left of value in this country.
We’ve basically institutionalized the process of capture.
On the other hand, I’m not sure breaking up the banks will achieve what you think, either. Smaller banks have been very effective at organizing themselves to promote their political interests. And I’m not sure how one would go about breaking up the large banks when government agencies do not even really understand what the banks are doing, mechanically-speaking, not to mention the instability that would create in the meantime. I think we need another alternative here.
Demos yes like in Volksverdummung – google doesn’t offer an English translation but the Spanish reflects at least part of it, also the synonyms offered on the site may give a further idea
I am all for informing the demos even if you do it in tabloid style but just by spouting hatred at the US and Israel – sorry – thank you – no!!!
Perhaps the United States is simply grading back into the rest of the world. Instead of the rest of the world aspiring to American standards, ways and culture, the Americans will come more and more to resemble the remainder of the world.
Not necessarily the banana republics, but a world of U and non-U, les grandes ecoles and everyone else, salarymen and the rest of the workforce, just to borrow terminology from elsewhere. Most countries have ‘two-track’ economies. Perhaps this aspect of American exceptionalism is simply dying a natural death.
I’m not sure how this jibes with the careerist ideology that underpins the organization of the political classes, the higher reaches of the financial services sector (and the general economy) or the mainstream media’s worldview. Perhaps the appeal of the radio talk shows lies in offering one of the few alternatives (on the right) to that ideology. Perhaps the rise of the blogsphere is a counterbalance on the left.
But, perhaps, having spent the last half century trying to learn the lessons of American success, the Asians can spend the next half century learning the lessons of its mistakes.
Sure there is an alternative. Let capitalism do the dirty work. Only exceptional people could do better, but they are not available.
I think that what needs to happen is a formal process by which the government declares that the unregulated banking sector will no longer be bailed out – the bailout will instead focus on the consumer sector, perhaps. And we’ll all have to deal with the consequences of the failure of unregulated banks, instead of the consequences of perpetually propping up their failure.
[Did you move your blog or stop blogging all together? Just wondering!]
When Standard Oil got too big it was split up to become a separate company in each state. Wasn’t that done with banks too? Time for that again?
I’m not sure anyone would believe them if they did… They haven’t even really started unwinding the assistance they’ve provided to date.
I did not have time to keep up the blog, but I might start doing a weekly market commentary on another site. Thanks for reading my blog and for your insightful comments :)
Interesting and good posts, Bond Girl.
I am minded of the Oil Industry, where in the past the small independents were very successful at pressuring the government to beat up on the Majors on many occasions.
Still, perhaps with lots of small and politically effective banks, we would have just regular regulatory capture, not super-regulatory capture like we have now.
The point about the difficulty of un-winding a too-big-to-fail bank emphasizes the importance of these ‘funeral plans’, no?
http://dict.leo.org/ende?lp=ende&p=wlqAU.&search=Volksverdummung Perhaps this is what you were looking for?
If you try to plow a corn field with a mule & you don’t have his attention, you’re wasting your time.
Until we get their attention, I think we’re wasting our time. I don’t know. Maybe that’s what Simon & his bloggers are trying to do. Don’t seem to making any progress. Feels good though. Just no results. In fact its getting worse.
I think the emphasis should be on “how do we get their attention”, rather than on “how do we fix our sick economy”
Well, it is one thing to say it is a good thing and another thing to actually accomplish it. Is there going to be a grand architect of the financial industry that is going to sort out all the inter-relationships these companies have and decide their smaller form? Who could possibly fill that role?
Another thing people do not seem to grasp is that we do not actually have large and small financial institutions in this country. We have large financial institutions with large financial institution products and we have small financial institutions with large financial institution products. People who think small institutions are grand are really just being manipulated by some genius marketing.
The size of institutions matters and it doesn’t. I think financial crises occur when the preponderance of market activity is subject to lower standards; it has little to do with the actual players. You can have a financial crisis with a lot of small players that made a lot bad loans and you can have a financial crisis where a few major players made a lot of bad loans. Both tend to end in the government taking responsibility for the system itself. We probably do not see this right now because our small bank failures are really only getting going, and we are only now confronting the problem that we are running out of qualified participants to absorb the bad apples. (Which leads to what? More consolidation?) I don’t know, I might be surprised, but I think being a large institution merely makes it easier to take down the system, but it is not a necessary condition for doing so.
I’ve looked at quite a number of dictionaries – yours doesn’t have it, Wikipedia doesn’t have it even though it is very much in use amidst the demos
– the demos knows normally quite well when somebody is trying to sell them for stupid = “für dumm verkaufen” – but once you mix it with a strong dose of “it’s all the fault of the Americans” and top it with some anti-semitism they go for it and the “elites” hurry up to lead the marching band. It is the kind of glazing by which you can sell everything over here.
so the best I can add is a verbal translation: stupidization of the demos/folks/people
“I don’t know what’s more sickening, the evil of the manipulators or the gullibility of the public.”
Both equally nauseate, though gullibility troubles more given it’s sound-bite origins that have become more than ever a defining quality of American society. As tea-baggers and town-hallers have evidenced, big media can (and often will) turn logic on its head and supplant reasonable discourse with unbridled passion and fear.
“guess by now I’m frustrated at how the only sane and angry expression on this subject is limited almost completely to the blogosphere”
So am I. But it really doesn’t surprise that the topic being discussed here today exists only (at least for now) in the blogosphere, where matters as important as these are so diffused. But I’m not discouraged. Would HFT have become a headline event had ZeroHedge not been on the issue months before it became Bloomberg, FoxNews, CNBC fodder? Would the alphabet soup of financial instruments and shell corporations having caused the crisis reached the public consciousness had so many experts in the craft not been at the keys with analysis? Probably not.
I believe as difficult an adjustment it will be for all who prefers trust over analysis, or faith over evidence (who, again, usually are the gullible un-empowered by misinformation, left prey for those that benefit from the informational asymmetry), the work Simon and James do here, and others elsewhere, reverberates. And the tenor of our comments do as well. Keep the faith.
“The smaller banks really do not seem to understand how they have been done in by the big banks – if they did get it, they’d be up on Capitol Hill and all over the media arguing strenuously for much tougher controls on bad big bank behavior. The lack of leadership among non-large banks is remarkable.”
I read something regarding this a few weeks ago. The point was made that the smaller regional banks are in such bad shape that they will depend on financing from the TBTF fail banks and also they hope to get a good price on their assets from the TBTF banks. They’re worried if they piss off the TBTF’s they will let the small, regionals die a horrible death
Time to turn a bunch of Senators out of office. It’s 1930 in most of the USA, 1931 in California. By 2012, it will be 1932 throughout the USA. I wonder what we will do?
Maybe the Mayab knew something after all.
We can begin with ending the conflict of interest between regulators and those they regulate by discontinuing the way these regulating entities are funded. For instance. I’m an appraiser. I hold a state license and am regulated by the issuing state entity. The state entity is largely funded by licensing fees. What incentive is there for this body to pro-actively regulate its members when uncovering widespread fraud would diminish its funding source. It bears stating these bodies are generally under-funded to begin with and cannot monitor its members effectively. While appraisers are low-hanging fruit in the finance matrix, their impact on the system is undeniable when similar disincentives across the whole credit-creation process places untenable pressure on those charged to maintain good character. This post at ZeroHedge yesterday on the SEC’s conflict of interest brilliantly illustrates my point.
Thank you for answering part of my question from yesterday about the “too big to fail” banks getting bigger since the bailout.
Now for the second part of my question about houses that are now worth less than replacement cost? I suppose that goes to the two-track America, but even rich people have lost property value that may be in the lower than replacement cost zone. Of course, I’ve heard rich people talk about their own houses and say, “I’ll never get out of this house what I put in,” but still they must care about staying above or at replacement cost.
As a Canadian I remember the WSJ in 1995 calling Canada a banana republic due to our $45B federal fiscal deficit. A LIBERAL government in 5 years brought us a near surplus and another LIBERAL government a surplus that held for 6 years running. And Canadians supported the cut-backs in programs.I could say that given the diffuse nature of legislative and presidential power in the USA, it appears that the country appears very close to banana republic status with no critical mass of power (like in the parliamentary system with cabinet and PM) to effectively turn the ship of state from disaster. Hubris will bring America to this end. Too many Americans believe their mythologies.
e.g.. what you say doesn’t matter nearly as much as what you actually do about something. I’m willing to meet as many of you as possible who will gather to surround the Capital & listen to a speech by Simon on the two tiered economy on the steps of the Capital. For a week if necessary.
Johnson mentioned his paper “Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth” on the importance of institutions. There was a pretty good piece in the financial times today on oil in Norway. I believe this article really underlines the importance of institutions on economic growth:
I believe the SEC is funded by industry fees right now. Those fees, however, pass through the federal budget and are appropriated to the SEC by policymakers, and policymakers do not appropriate all of the fees received to the SEC to fund its operations (something Schapiro is trying to change).
FYI, here is an interesting article comparing the compensation arrangements of the federal regulators and SROs:
I’ve been trying to understand why some Americans express a degree of antipathy towards government that far exceeds any I have encountered in Canada. It’s very possible Canadians have a better experience with their government because of the public goods we enjoy. For example:
(1) universal health care that compares with the best in advanced countries
(2) the vast majority of children are educated in a public school system that their parents approve of
(3) at one time university education in Canada was nearly free and it remains inexpensive compared to American universities
(4) there is no death penalty in Canada, in other words, our judicial system does not kill people
(5) there is gun control, 99.9% of urban Canadians have virtually no interest in owning guns, so our streets are safer
(6) the World Economic Forum has ranked Canada first out of 134 countries for “soundness of banks”
The remedy the American right wing has for social-economic problems is increasingly smaller government and larger corporate influence (the free-market). Possibly this is a self-fulling “spiral” towards increasing dissatisfaction with government and possible chaos.
Perhaps 100% of law-abiding urban Canadians support gun control and have virtually no interest in owning fire arms, so our streets are safer and our culture less violent
Thanks for the link. Much how Hank Paulson perfectly timed his leadership exit from Goldman Sachs—solidifying his $700M fortune just before the ‘07 collapse—Shapiro may have opted out of her lucrative tenure only in anticipation of the next shock.
To my point about regulator funding. Whether member fees are first funneled elsewhere then appropriated, or put directly into a general operating fund, member (or industry) funding is what I believe must end in order for positive alignment of oversight incentives industry-wide to occur. It is true, however, that former SEC chief Cox and his predecessors grandly illustrated how well Trojan horses can be placed into organizations to do others’ biddings—or sabotage the organizations outright—but powerful members funding industry oversight operations ultimately have economic control over their regulators. I believe the alternatives are few. But some other funding model must be examined if we’re to believe any retooling will serve any purpose other than to subdue observers lacking the wherewithal to see through the smoke.
Read my comment on the previous blog on the two tiered economy. I couldn’t agree more with your thoughts here.
What I said in that previous comment was that the favored groups you mentioned, and I mentioned many of the same, have successfully positioned themselves as Socialists, and operate as such within the “Capitalist” system. An ever decreasing goup of Capitalist players (small businesses, mid sized businesses, entrepreneurs, higher W-2 wage earners, sales people, etc.)in the Capitalist system is getting squeezed harder and harder to pay for ever increasing Socialist benefits of those that have positioned themselves to take advantage of this structure.
There is profound irony in this in my view. For all of the naive and uniformed worry expressed by many Americans about “Socialism”, few appreciate that an increasinly large portion of society is operating under Socialist principles! In fact, to your point, the best way to get ahead in the US is to position oneself to be a Socialist-work for the government, education, a too big too fail bank, be a farmer, work for a pharma company since the government won’t negotiate prices, work for an insurance company.
The absolute last plave you want to be in in an entrepreneurial small business that is dependent on credit, law suits in the absence of tort reform, subject to regulation, and bears an ever increasing share of the tax burden required to pay for the Socialists.
Thus, the moral of the story is to succeed in America, become a socialist. You certainly don’t want to be sweat of your own brow capitalist today.
The American right wing may talk of a smaller government, but in reality makes it bigger. Possibly that is the reason why there is increasing dissatisfaction with government.
One more idea on how to change behaviors of the bankers – pass a regulation that caps wages at $400,000 for anyone (not just those in the C-Suite) who works in a financial institution that accepts federal aid, bailout money, etc.
So no bonuses or multi-million dollar salaries if you work at a place that profits by relying on federal welfare programs.
I think you’d see a remarkable behavioral transformation almost immediately if bankers realized their high-risk behaviors could hurt their pocketbook. They obviously don’t care about the bank’s bottom line, but I’m sure they care a great deal for their own bank accounts….
I’ve heard wonderful things about Canada and have given it much thought for relocating. Though I have yet to visit, the healthcare system their would be one of my tops reasons for settling if I went.
How many of us middle class folks are actually funding our own demise through our stock ownership of megacorporations who offshore jobs, through our 401Ks held by IBs, and through our deposits at TBTF banks? Just something to think about:-).
But I think we might have had a banana republic experience when a certain German lobbyist helped Brian Mulroney oust Joe Clark in a takeover that lead eventually to the demise of the Progressive Conservative Party. The party of the father of Confederation no less.
“It’s all calibrated to show the masses the semblance of protest and give them plausible-sounding slogans even as the focus in every case is against the public and in favor of the very corporations already plundering the public.”
A case in point, the brownshirt town hall meeting disruptions, all so obviously and effectively orchestrated by industry tacticians. I recall an ex-marine up on his high horse lecturing a congressman in terms that so betrayed his fasco-con ideological predispositions that you could almosr expected him next to call in a child-murdering drone attack on the hall. And I say this with absolutely no present personal inclination to support Obamacare. To the contrary, I have call for the defeat of the proposals in Congress. Its just best to know which SA battalion is serving next to you in the order of battle. :-)
Don’t you mean smaller government but privatization if possible of all forms of public goods (eg, health, prisons, education, military, infrastructure, utilities). In other words, the right wing position is less government but large for-profit corporations and large corporate bureaucracies to deliver public goods in lieu of taxes.
Come to think of it the Brian Mulroney government was responsible in large part for that $45 billion deficit the WSJ was writing about.
I often describe public sector with the word government, because essentially spending (not the head count) determines the size of the government in the economical sense. Therefore increasing public spending increases the size of government regardless of the contract type of its employees.
You’re right on point, Rebecca. Taken further, the question then becomes: how many of us middle class are still funding TBTF operations through continued debt service? That is, what if the people collectively turned the tables on the hostage takers and ransomed debt reduction / forgiveness in exchange for continued repayment? I am not inclined to advance notions that could possibly corrupt moral suasion, mind you. But it merits examination in the context of almighty oligarchs vs. the powerless people and governments they plunder. The people have leverage, they just refuse to exercise it.
A recomment –
Anybody seen this? Debt repudiation. Man, this took a lot of courage. Just think what’s going to happen when the banks, Bernanke, Geithner, Summers & Krugman, et al get a hold of this. They’re going to scream to high heaven. A lot of hot air & bluster coming up.
But, does this include all loans or just mortgages? Seems like all we need is to get this around the blogosphere, then set a date. Could this be the beginning of the end of the plutocracy? Sounds like a good start.
Wonder what Simon & James think about debt repudiation?
The 304,000,000 U.S. citizens are powerless to say anything to the other 59,724 who control them.
Why would someone from an uncivilized country want to move to a civilized one?
Sorry, too many people with murky pasts and motivations confirming our suspicions and leading us to our epiphanies.
Simon, just what is it you do at MIT? Yes, yes, Ronald Kurtz (member of MIT Corporation), Entrepeneurship, etc., etc, but what do you actually do there? The program’s website shows us that it seems to be active, and has a number of teaching assistants associated with it (none of whom are wearing glasses or sporting pocket protectors in their photos! what kind of an image is this for MIT?)
Here is a list of the current semester offerings (huh?) http://entrepreneurship.mit.edu/current_semester.php
Here is a list of faculty (huh?):
This is one of the finest universities in the world. Should we be worried about the attention to detail on the website? How does this reflect on the credibility of the people that will be entrepeneuring the hell out of this planet? Speaking of entrepeneurialism — innovation, our old friend is important here, correct?
This institute (Cambridge-MIT institute) appears to be affiliated with the center: http://www.cmi.cam.ac.uk/ Notice how often they mention innovation here? Seems to be a very important concept for them. In any case, they don’t look very active. The publications on their website are nearly 3 years old.
How did you get involved with the Franco Modigliani papers? How significant do you think his work is today and do you think it might have contributed to our little problem? From Wikipedia:
“Along with Merton Miller, he formulated the important Modigliani-Miller theorem in corporate finance. This demonstrated that under certain assumptions, the value of a firm is not affected by whether it is financed by equity (selling shares) or debt (borrowing money).
He was also the originator of the life-cycle hypothesis, which attempts to explain the level of saving in the economy. Modigliani proposed that consumers would aim for a stable level of consumption throughout their lifetime, for example by saving during their working years and spending during their retirement.”
The value of a firm. Hmmm. Indeed. Haven’t we discovered that the value of a firm is now mostly dependent on perceptions provided by PR and accounting?
People tend to save during their working years and spend during their retirement? One hopes that the writer of that particular entry is missing some key elements to his thought. What we know now is that people tend to save during their working years unless they have been tempted not to, correct? Keeping up with the Jones’s?
They finally removed the photo of Samuel Huntington from the Olin Institute website. Progress! (Yes I find myself as annoying as you do).
May I refer you back to some lingering questions? What were you up to way back when at the Olin Institute for Strategic Studies? See:
The connections between “spooky world” and economics world might not be obvious to everyone. If one viewed intelligence agencies as the personal playthings of very powerful people and organizations, as tools to expand wealth and influence, it would make sense to employ economists as analysts, but probably more important to employ them as propogandists, yes? If one were to ask you if you are employed by an intelligence agency, you could probably say no fairly honestly, couldn’t you? Plenty of deniability. It is not deniable, however, that you were associated with an institute is dedicated to producing scholarship on issues of national security. It is not deniable that this fact has been less than prominently featured in your bio. There are so many questions… what were you doing back in Russia with Peter Boone at that UBS whatever it was? Assisting with privatization? (Odd, but I can’t seem to find those links easily, the ones that provide the name of the company you were associated with in Russia. Any pointers?)
So, back around to where we started this: What are you guys up to? Your big message is that there has been a “quiet coup.” Great. And then? Is the point to stir the masses to action? And then? I’m losing patience. What’s the endgame? Do you feel that your fighting the good fight? Like Modigliani versus the fascists? Like Mont Pelerin versus the fascists? Could it be that they’ve fooled you and that the fascists in fact are letting you help them consolidate power on the new, wide open global playing field? Have *you* been captured? If so, snap out of it. Be a mensch.
[Putting down the opium pipe]
LJM, what does replacement cost have to do with it?
Ah, I think you you mean “dumbing down of Americans” (something we are all familiar with)?
Ian Welsh proposing socialized banking or something.
And just to be clear, are you talking about the shock doctrine itself or the way you have observed it being marketed?
We have lost the bed rock principle-Capitalism.
Our willingness to sacrifice this principle is what got us into this mess, and this bedrock principle is what is being most damaged by our efforts to extract ourselves through our willingness to sacrifice it in an effort to achieve much lesser goals.
And all efforts thus far have been completely ineffectual and terrificly damaging because we do not understand what the true problem is. We continue to be willing to sacrifice the PRINCIPLE to save the lesser important SYSTEM through attempts to save the least important INSTITUTIONS of systemic importance (too big too fail banks) within the system itself.
In essence, we have abrogated the bedrock foundational PRINCIPLE of Capitalism in an effort to save the lesser important SYSTEM that is ostensibly based on the principle, by saving some comparatively unimportant and inconsequential too big too fail INSTITUTIONS within the system itself.
Bassakwards. The INSTITUTIONS operate in the SYSTEM based on the PRINCIPLE.
Here’s how they rank:
1)Principle Capitalism-of bedrock primary importance
2)System-American Capitalist-of secondary importance
3)Insitutions-within American Capitalist System premised on Capitalism Principle-of least importance
We don’t have a problem with regulatory capture, or even system capture, we have a problem with principle capture.
And, we got here because we were willing to abrogate the Capitalism PRINCIPLE in the first place. And, we have continued to abrogate the Capitalism PRINCIPLE in our efforts to achieve the much less lofty goals of saving the SYSTEM by saving meaningless TOO BIG TOO FAIL INSTITUTIONS within it.
When this debacle began, because we had already made the error of abrogating the principle to begin with which facilitated us getting into this position in the first place, and we unconsciously fell into the trap of further abrogating it in an attempt to try to save the secondarily important system by saving some of its least important, and inconsequential institutions.
I submit that when this debacle began, we should have first and foremost sought to preserve the PRINCIPLE. Under the Priciple of Capitalism, institutions in the system absolutely, unequivocally, MUST FAIL under the circumstances. The institutions within the the American Capitalist System based on the Principle of Captialism WERE REQUIRED TO FAIL.
What we have lost is the principle. And now we have no rules. And regulations that apply to institutions and industries will not fix the system, or resurrect the principle.
We need to restore the principle first and foremost, if possible.
Bernanke should have made the case long ago at the Basel Committess that instead of measuring PD and LGD, risk-managers should have thought to measure PR, or Probability of Revolt. When survival-mode takes hold of people, insurmountable debt is seen for what it is and repayment becomes a non-option. Clearly U.S. household indebtedness is not sustainable and the bleak employment picture makes the case. Next generation sources of mass employment (I belive) are likely to yield much lower wages given labor surpluses, thus depressing prices and ensuring that inflated legacy debts will not be repaid.
Hey, capitalism is whatever we say it is.
Probability of revolt is negative. If there were a revolt, crowds or people are easily dispersed now by microwaving them. http://www.newscientist.com/article/mg18725095.600
I meant to link to this. http://www.newscientist.com/article/mg20327185.600-microwave-weapon-will-rain-pain-from-the-sky.html
In this little drama we witnessed, they did that. They let Lehman fail, and then said “Oh no, that was a mistake. We really are true believers, but we must be pragmatists too.”
“And just to be clear, are you talking about the shock doctrine itself or the way you have observed it being marketed?”
first I keep reading “dumb” and I am never quite sure of the exact extent of the meaning of the word (if you learn a language outside the country expressions like that are not well accessible) However, the German word “dumm” means what a teacher would call a pupil in class, somebody whom he considers deficient in intellectual ability. I assume if a teacher in the US would be cruel enough to do something like that he would call the child stupid and not dumb i.e. there is nothing funny about dumm it is straight and openly meant to be mean.
as to Naomi Klein:
yes, I consider marketing to be important and hers is so objectionable that she is just not my kind of person
anybody who starts her reasoning with using experiments by nutty psychiatrists as analogies, works from a mind set I want to stay away from as far as possible. One blogger I trust calls her from the “loony left”, that’s probably all that needs to be said about her. … and the way she accuses Israelis for keeping Palestinians as guinea pigs – with the same right you could say the US went into Iraq only because they needed guinea pigs – really to call stuff like that doctrine is an insult to the word doctrine.
This morning I get Naomi Klein recommended on this blog and now comes Uncle Billy with a hard to read but probably worth the trouble to check through post. Per Kurovsky was after a similar point. Quite a while ago I heard in a podcast Mr. Johnson quoted from not a long time back with one of those rosy forecasts. Maybe he is an honest convert but with Naomi Klein in the mix he is not for me anymore. Maybe Uncle Billy is on to something and something IS wrong here.
Anyway I probably have gotten from your discussions all that’s in it for me i.e. the proof that our journalists who are constantly telling us that in America everything is better have no idea what they are talking about, just as they have no idea what they are talking about when they are telling us it is all America’s fault and America is doing everything wrong – I heard that at school in 1958 from a teacher who had spent the terrible years of the “Reich” in Bolivia (we never asked why – incredible isn’t it?) and he also told us that America was on the verge of falling down any moment just like ancient Rome did – well 50 years have passed, hopefully he stays wrong for as long as I am healthy enough to enjoy my retirement).
Also I have come a lot closer to sorting out what of the stuff happening is stuff that has always been like that and what is new, if there is anything new – my bet is on there is something new
people like Naomi Klein are feeding on that there is all kinds of appalling stuff happening but people who believe in that stuff being the result of careful longterm planning just make me impatient – either there are people out there who are a lot better at everything than any of the often amazingly brillant people I have clerked for or people blabbering about doctrines and (political) conspiracies have read other books than I have.
Oh and I have a name for the opening stunt of her marketing gig. I call things like that horror porn
and all the journalists who had been appalled at the Bear Stearns rescue sternly demanded that Lehman would be allowed to fall – when the avalanche followed they stayed quiet for some day and then were appalled that whoever could have allowed Lehman to fall.
Appall-ment sells obviously … is that going to be an improvement over s..x?
Atlas Shrugged pointed out that the corrupt would insert themselves into everything, and skim from all.
On top of that, they would make it illegal (write laws) to bypass them, so that if one fought the corrupt, one ended up in jail.
Ironic how the corrupt can destroy both communistic and capitalistic systems, isn’t it?
Well if we define big government as the size of the deficit and debt it is legacy of Conservative governments on both sides of the boryder.
Orwell says revolt needs a leader who is a gentleman
– a gentleman is described by Orwell as someone who expects his dole money being sent to him while the lower classes will tolerate being made to stand in line to receive it
– now if there is now a substantial number of middle class being robbed naked there might be a gentleman/woman among them and then no crowd dispersing will help
– oh and I am all against revolt
– their record through history is not good
– the dieing is, as always, overwhelmingly done by the lower orders.
The only thing capitalism had going for it, over communism, was personal skin in the game and failure as an accepted outcome (total personal loss) for bad decision making.
The corrupt have now removed any risk of total personal failure as a potential outcome for disastrous decision making, by inserting the tax payer as the bag holder for their bad decisions.
We now have ZERO consequences for bad decisions,
and all that will come with it. Epic failure.
You are most certainly correct, but have you seen the price of 3 pac tee shirts at Wall Mart?
I love me some cheap Chinese made tee shirts!!
Have we got their attention yet?
Wake me up when we’ve got their attention.
First of all, delighted to see the plug for Shock Doctrine. And very interesting reactions here in these comments . Actually, it is anything but a book about conspiracy theories. She is careful to take no position on possible US government complicity in 9/11.
What she does do is offer a thoroughly-researched alternative viewpoint. Truth doesn’t lie in skepticism or dogma, but in the tension between the two. And the rebuttals here deserve as much respect as Naomi Klein’s brave stand. I recommend everyone to read Shock Doctrine who hasn’t.
Meanwhile, today, our dear old perfidious Albion is living up to her reputation as proof emerges that the Lockerbie bomber was released as part of an oil deal, see http://www.timesonline.co.uk/tol/news/politics/article6814974.ece
To which, when first raised, the government response was: “The idea that the British government and the Libyan government would sit down and somehow barter over the freedom or the life of this Libyan prisoner and make it form part of some business deal … it’s not only wrong, it’s completely implausible and actually quite offensive.”
It would be a naïve person indeed who didn’t believe that our leaders were perfectly capable of the disgusting behaviour that Naomi catalogues.
This is in reply to Silke (5:36 pm).
“Revolt” wasn’t the precise word. It certainly didn’t convey what I meant when attempting to describe the mass repudiation of debt-service. Certainly infighting among hostages will never yield enviable outcomes.
However, we must recognize that in attempting to align our lives with our endowments, pursuing more socially valuable endeavors comes at high cost and is not possible if we’re to remain enslaved to creditors that will see to it we’re of no value to society without them. The swollen cost of living coupled with massive debt overhang in this country will ensure that those so inclined to paint a picture to voluntarily share with a cancerous child, or volunteer to teach music, or aid the elderly, won’t have the opportunity. A fundamental misallocation of human capital and worldly resources will be the defining story of the last two decades. Let’s hope we do something to avoid continuing this sorry fable into the next.
Well then color me naieve. I’ve proven a priori in earlier comments that not only could such discussions not occur, but that even if they did occur they didn’t discuss anything about any matter at hand, and even if they did discuss these things, they said only the most gentlemanly and courteous things to each other. Moreover, I am perfectly willing to believe everything they say at face value and completely discount anything anyone admits that would be at all detrimental to elites of any sort.
But that’s not all, I will smugly marginalize anyone who disagrees with me by saying that they have a “tin-foil hat” on. Remarkably, this works rather well.
Truth doesn’t lie in skepticism or dogma, but in the tension between the two.
That is a very interesting epistemological theory. Some “losers” maintain it resides in what actually happened, things they call “facts.” I prefer to think of truth as those things spoken by the government and the captains of industry and finance.
This sounds like the reinventing of the wheel to me. Two-track economy huh Simon?? WOW!!! I THINK YOU’RE REALLY ONTO SOMETHING HERE SIMON!!! Gee, maybe you can add some more footnotes, not sure if I can follow this “new paradigm” Simon.
We got ONE good thing out of this. Naomi Klein’s book is out and I think I’m down to my last roll of toilet paper.
I think you’d better leave the dripping sarcasm to me. And by the way, the paper in Disaster Capitalism is far too rough to use as toilet paper. I recommend the modern library version of Das Kapital.
You’ve unconvered the principal principle of appall-ment.
The Curious Case of Naomi Klein.
She’s even more appealing and trusty than Elizabeth Warren. She taught us about taking advantage of shocks, or even creating them, for profit. But what’t the deal with her “Miliband Fellowship.” Last time I looked (about 2 years ago?) the Miliband Fellowship program didn’t have a website. She had dropped out of UofT, but had “Miliband Fellowship” on her resume, which gave her an air of credibility. But what was it?
Ralph Miliband was a longtime professor at LSE (there’s that pesky LSE again). His last post was at CUNY. He was a professor of Marxist Thought. That fits nicely with Klein’s warrior-leftist bent (not that there’s anything wrong with that). His son, David, happens to be the British Foreign Secretary, as in the head of the SIS (MI6) reports to… him.
Some curious things about the Miliband Fellowship. The website lists only 6 recipients over the past 12 years. What are the criteria for receipt of the fellowship? Who awards it? Who funds it? They talk about a mysterious benefactor.
In short, it appears Klein is another soldier in the propaganda war. She is also helping the masses become disaffected, like this blog. They are giving us the straight cold truth, and we’re getting angry.
Disaffected/getting angry. Yes I do see the inconsistency.
Also, neglected to mention something that Simon would know — that David Miliband used a “Reverse Rhodes” (Kennedy) scholarship to study at… MIT.
Would you want to have to sell your house for less than the house is really worth, ie the cost to replace it? At the moment, having to pay home owners insurance on my house for a replacement cost that I know is much higher than what I could sell my house for doesn’t make me happy. It’s another way to be underwater if you need to sell your house. That’s how I look at it anyway.
What are the criteria for receipt of the fellowship?
Let me take a wild guess: interesting people who can chat in the spirit of Ralph Miliband?
Where in this do you find something sinister?
It seems to me that all sufficiently old houses are worth less than the cost of replacement. We’re talking some depreciation every year right?
Maybe that only proves that in the end one should always think for oneself. By not allowing capitalism heal the system, the responsible were let of the hook, no lessons were learned and we are only heading to another possibly bigger crisis. I think this is an even bigger blow to the myth of the American dream.
It’s not the program itself, Yakkis. It’s Naomi Klein’s relationship to it. (Which I wouldn’t characterize as sinister, but rather, curious).
Traditionally, fellowships are awarded to post graduate students or professionals. The other five recipients in this program all possess doctorates, when, in contrast, she left school before completing her bachelor’s degree. Remember the song “One of these things is not like the other?” The question is “why”? And again, who funded her stay at LSE? And why?
Here’s something interesting I didn’t notice before. One of the other fellows listed, Dr. Noreena Hertz… Also studied in the states, like Miliband, but she went to Wharton, before she went back to do her PHd at Cambridge (there’s that pesky Cambridge again). From Wikipedia:
“Prof. Noreena Hertz (born September 24, 1967, London) is an English economist, author and campaigner. She is an expert on economic globalisation.
In her 2001 book The Silent Takeover, Professor Hertz warned that unregulated markets, corporate greed, and over-powerful financial institutions would have serious global consequences that would impact most heavily on the ordinary citizen. Following the financial meltdown and recession of 2008-09, many commentators have described Professor Hertz as a visionary”
Visionary indeed. And she’s like Simon Johnson’s spiritual twin. Heavily invested in globalization. Her books is called “The Silent Takeover,” while Simons magnum opus is called “The Quiet Coup.” And, lo’ and behold, she also spent time in Russia helping them with their privatisation, just like Simon.
“At the invitation of a professor at Wharton, she then went to Russia to work for the World Bank and play a part in setting up the Russian stock exchange and in advising the Russian government on its privatisation programmes.”
Doesn’t this bone stick in your throat, Yakkis? Don’t so many others? Hertz, hero of the anti-corporate-globalists, spent time in Russia, assisting with their privatisation. Simon Johnson, with his “Quiet Coup,” helping us understand, like Naomi Klein does, how we are getting so very screwed. Johnson, Yakkis, works with Peterson Institute. Pete Peterson is one of the wealthiest and most powerful individuals in the world, Yakkis. Do you think these people are just being nice when they chat, and blog? That they are just being humanitarians? Think, Yakkis, think why they are being so communicative and friendly and showing us just how bad those evil global corporates are.
Last thoughts on some interesting connections.
1) One of the other recipients of the Miliband Fellowship was David Harvey, the Marxist lecturer at CUNY. It was just yesterday that I happened upon this cage match between Brad DeLong and David Harvey, from back in February:
http://angrybear.blogspot.com/2009/08/quote-of-day-esp-for-economic-modelling.html (unreachable as of this moment).
but here’s what one of the comments referred to:
Follow the link to DeLong’s post and then look through the comments. I’ve never seen him so defensive before — the way he responds in brackets to many comments.
2) One of the co-“convenors” of the Miliband program at LSE is David Held, who is a part of Centre for the Study of Global Governance. Look who else is a member of this CSGG — Mary Kaldor! Who? The daughter of Baron Nicholas Kaldor, the Cambridge economist from Budapest.
So? Well, for those inclined to the sinister, we have landed at Hungarian connection. Mary is reported to be one of the founders of the European Council on Foreign Relations, a…. George Soros initiative. She’s also involved with opendemocracy.net, as is Soros. (And the usual suspects, like the Ford Foundation and Rockefeller Bros. Foundation). If something is labelled “Open” you can usually find Soros involved somehow. (Goes back to his stated Karl Popper Open Society predilictions)
Doesn’t all this “openness” strike you the same way as all the “free markets” and unfettered finance business that got us into our little predicament? Especially when its being pushed by a guy like Soros? (Did we ever find out if his name is actually a little joke? Soros being very similar to “tsooris” or “sooris” in Yiddish, meaning “troubles”?)
“Hey, capitalism is whatever we say it is.”
I like that! It’s a wonderful turn of phrase.
Sometimes I wonder whether economic depressions are indicative of rare moments of lucidity in which human beings collectively realize that our economy only “works” because we share the delusion that things have inherent value. As a matter of fact, things only have the value we assign to them. After all, capitalism is whatever we say it is.
The Kindle edition?
But Pete Peterson is a staunch Libertarian. You seem to believe he is trying to control you, but he just wants to set you free . . .
Naomi Klein and Pete Peterson oppose each other. As a libertarian, Peterson follows Milton Freidman. Klein attacks Freidman. I have no idea how you can conflate Peterson and Klein by triangulating through Simon.
Think, UBC, why did Uncle Milty and Grandpa Ludwig show us that the economy is determined by individuals who are “free to choose” and entrepeneurs when, in fact, the economic engine powering and driving the bus is the global corporation? Do you think they were just being humanitarians?
Look, I am not against the concept of corporations per se (I own one and have been an exec of a public corporation), but we have to recognize that corporations as they exist today (1) were unheard of in Adam Smith’s time, (2) essentially arose in the late 19th century, and (3) fundamentally change economic decision making because of agency issues. It’s not that global corporations are evil, it’s that they are not subject to the same rules that guide human behavior.
There’s truth to be found everywhere, but you can only find it if you free yourself of your assumptions.
I’m getting sick of this slander of Naomi Klein, who’s just about the best writer we have going today on these issues.
I especially despise this notion, which I’ve come across many times, that there’s something fanciful and tendentious about her linkage of psychological torture experiments and actual torture.
Anyone who’s actually read the book knows that it’s far more than a “metaphor”, that:
1. Psychologists like Ewan Cameron who ran these experiments received CIA money and lectured to intelligence and army audiences.
2. In turn the CIA and the army, using knowledge developed in part through these experiments, using tools like the KUBARK training manual, trained right wing Latin American officers in torture techniques.
3. Which officers then used this training in right wing regimes throughout Latin America, to uphold regimes based on economic doctrines that right wing Latin economic cadres had simultaneously learned in Chicago and then spread among their peers back home.
So although Klein does draw rich metaphorical lessons from the links between torture experiments and Chicago “shock therapy”, there’s also the direct historical linkage, which she reports as a journalist.
Anyone who has read the book would know all this.
As for her media presentation, I only wish she actually were trying to organize a true democratic movement. But apparently that’s not her job; she’s a journalist.
Scot, I think there was a little tongue in cheek there, but I’m not sure where it starts or ends so I’ll engage as if it’s all in earnest.
Peterson the Libertarian: Ok. Control people? I’m quite sure he does want to do this. It is extremely profitable to do so.
Conflation of Klein with Peterson: I don’t see where I did that. I follow associations and attempt to separate what people say from what people are actually doing or did. I’m extremely skeptical of people and entities that have been astroturfed into credibility. This blog appeared magically, out of nowhere, for instance like a fly from no maggot with the help of what looked like a professional PR effort. Klein is associated with the LSE and people associated with Marxism, the New Left, etc. And yet, when you push things far enough, you often find that the money behind organisations like LSE comes from individuals and entities that could hardly be considered “leftist.” Just as we have the kabukki of democrat/republican or conservative/liberal here in the states, with the same foundations and corporations funding it all, it looks like this whole leftist/socialist/marxist/labour is a big sham. Oh certainly there are huge personalities involved that may be extremely committed to their ideals — it’s just that they might not realize that they are serving masters they would choose to serve.
Was Klein awarded a Miliband Fellowship to give her just enough credibility? It certainly associates her with the world of serious economics at LSE. She’s very attractive, very marketable, and has the family pedigree. She might even firmly believe in what she’s doing. With the level of PR that’s floated her to the ranks of Chomsky, though, one wonders just how organic the Naomi Klein experience really is.
You are speaking with one of the world’s finest typing examples of confirmation bias. In my paranoid, flat little world, yes, the Kleins and the Petersons could indeed be working towards the same goal. That might be the conflation.
Do I think they were just being humanitarians? Nope. (Didn’t get your point here)
Global corporations: Not sure I got your point here either. Personally I do see them as kind of evil. So many layers of people and processes that can separate their activities from the consequences of their activities. Killing people, poisoning people, ruining communities like happy-go-lucky juggernauts.
Truth to be found everywhere. Indeed, but what I find most useful are the truths that are most easily found. The ones that are marketed and offered to us like low hanging fruit. We grab at these truths and ideas. Naomis pretty book that makes us so angry; Uncle Milty’s “Free to Choose”; Pseudo-intellectual Hayek and Mises sold to impressionable minds like a weapon that can be used to bash others over the head with.
Bottom line: There is a huge war of perceptions going on. If you can follow the money, and keep an eye on what people are doing, instead of what they are saying, you might have a chance of understanding of how this world is being molded and why.
UBC (now UB v. MP),
I need to ponder on what you said a bit before I can get back to you. I greatly appreciate the detailed response, though.
I’m a skeptic, so I love skeptics. Which means I think love you, man (even if I may not ultimately agree with you). :-)
Thanks for taking my comment as it was intended: a challenge. You’re a mensch.
re Naomi Klein
some time ago I started listening to a series of lectures by Hubert Dreyfus who said over and over again “my hero Heidegger”
– now I would wish that at least he mentioned iover 3 lectures that there is a wee little bit doubtful stuff in Heidegger’s life what in polite society is called some controversial acts
but no its “hero, hero, hero”
Heidegger may have written all kinds of stuff which turns philosophers on but leaving the dreams Nazism gave him totally out of the picture feels dishonest to me
the wrapping counts it is not chosen for nothing
by the same rule I am not willing to touch a heap of possibly accurate facts accumulated by Naomi Klein if she sells them the way she does.
and as to the appalling stuff the US does or has done according to Klein: empires have always been ruthless whenever and wherever they are threatened or imagine themselves to be or where say see a heap of worth having to be acquired
– that is nothing new – we (the next generation) loved and adored exactly the same American soldiers who had bombed us a month earlier to smithereens
as far as empires go:
in my book the US is an amazingly benevolent empire and like all people who wield power over little me has to be watched constantly doubting everything and everybody
how about picking and grooming those people who might have the right mixture of showmanship and smartness
like for example Marion Gräfin Dönhoff, old East Prussian high high aristocracy, and her friends in Hamburg, grooming Helmut Schmidt to become eventually chancellor
Sinister me would guess that during the grooming process enough intimate knowledge of the person is acquired so that the danger of him/her getting out of hand once he/she is at the top can be neglected – and the whole procedure may even turn out to be to the good …
There have been no discussions in Washington, economic academics, etc. in developing policies for having a viable and prosperous nation, once again, which includes having manufacturing jobs in this country. The thought of bringing back free market economics and free trade back is frightening – neither works in the real world and hopefully Milton Friedman’s idea of deregulation has died.
What are economists thinking in terms of new economic models?
Good question. Macroeconomics has hardly covered itself in glory. What now?
The tiny problem with “what actually happened” is – as a Romanian teacher put it to me – “history is not what it used to be”.
“Where Have You Gone, Bell Labs?” BusinessWeek Adrian Slywotzky
@ page 2 -“As a consequence of exporting good jobs that are not fully replaced, the U.S. demand engine is broken.. Of the roughly 130 million jobs in the U.S., only 20% (26 million) pay more than $60,000 a year. The other 80% pay an average of $33,000. That ratio is not a good foundation for a strong middle class and a prosperous society. Rather than a demand engine, it’s a decay curve.”
much more….5 pages…
We need to get started now to reap the rewards 10 years from now…
finally there is a little bit of sense!
“The problem with a highly regulated economy like ours”
highly or lightly regulated is one way to think about regulation
i would rather think in terms of effectively or ineffectively regulated
and i do not think the bigs – big finance, big pharma,
big oil, big insurance, big public utilities, big natural resource extraction, and big transportation are effectively regulated at present
As I have said before the clearest evidence of ongoing global warming is that the parallel of the banana republics is moving northward
The same in Venezuela though there the cover is not the “too big to fail” but the cooperatives. Between 2003 and 2008, 261,513 cooperatives were formed in Venezuela because they were following chavez’s oil money… most found the seed money and thereafter immediately stopped any further cooperation
Back in 2003 there was a lively debate going on about how the upcoming Basel II regulations would favor the larger banks, as was absolutely clear. I know since as an Executive Director at the World Bank I loudly protested how those regulations would negatively discriminate against emerging countries and smaller banks… of course my shouting, especially since I was a lowly non PhD was to no avail.
By the way I have not yet found any comment made by Simon Johnson alerting to this danger. Indeed surprising since those Basel II regulations are still in place acting exactly the way it was alerted they would act.
jamzo writes: “big finance, big pharma, big oil, big insurance, big public utilities, big natural resource extraction, and big transportation”
And here in is the contradiction of the free-market fundamentalists. They want smaller government and deregulation. But what you end up with are huge corporations that dwarf the power of American democracy.
Among the lies: universal health care will place government bureaucrats between patients and their doctors. The truth is the health insurance business has created a — massive bureacracy — that rations and denies care to American patients based on income.
“New dimensions of differentiation are also taking hold within occupations and within industries”
The financial regulators deepened the division between those perceived as less risky and those perceived as more risky with their minimum capital requirements based on perceived default risks. In most other aspects of social life such discrimination and profiling is prohibited.
And this regulatory division is even more perverse in a recession when some triple-A rated clients are downgraded and the banks have to get new capital to cover these; and which mostly comes from stopping lending to those of which require even larger capital requirements. This is the most dangerous of all pro-cyclical effects of the Basel regulations, but also the most ignored.
If my house were a car, that would certainly be the case. Given the recent housing boom, houses were inflated far beyond the cost of actually building the house and existing houses could fetch far more than the actual cost to build them. I guess the point I am trying to make is that my house has become more like my car in terms of replacement cost. I’m wondering how costs like these factor into the two track economy. Obviously, people who bought at the top of the market and are underwater are walking away from the house. For those who remain in their homes, like me, who didn’t buy at the top of the market, it seems like the value of a house should be the replacement cost. In a solid economy, it seem that’s been the case. In countries that have had shattered economies, people have walked away from their homes for greener pastures. How close to that shattered economy are we who aren’t on the track economy the big banks are on now?
Re Naomi Klein let me phrase it this way.
Would Naomi Klein trust herself to be able to perform an objective analysis without any data mining to support her case; and without picking or high-lightning of the arguments that favors her position; and without ignoring or at least bending those facts that do not; and all in the search of the real truth completely independent and unbiased by any political agenda? Most probably, she would not. And so why should we?
Silke “as far as empires go: in my book the US is an amazingly benevolent empire and like all people who wield power over little me has to be watched constantly doubting everything and everybody”
I totally agree both with “The US being an amazingly benevolent empire” and that it behooves us all to see it keeps on being so.
Two Track Economy and The Fed:
The financial sector has grown to be a larger part of the overall economy. The financial sectors share of credit (debt) has increased from 15% in 1974 to 41% in 2008. Consequently, the economy is now more vulnerable to the effects of a bursting credit bubble stemming from the financial sector. This is more problematic to the extent that credit induced recessions are more severe than non-credit related recessions, such as the bursting of the high-tech bubble.
By law, the Fed has a responsibility for the stability of the financial system. The Fed was created in 1913 to provide temporary liquidity to banks to meet depositor withdrawals caused by financial panics. Fed liquidity enables banks to avoid selling assets in distressed markets where asset values might be temporarily impaired. The law allows the Fed to lend based on acceptable collateral, to otherwise solvent banks. Over time, a variety of tools have been added to fight financial panics, including FDIC insurance.
In the current crisis Fed actions departed from past responses in a number of important ways. First,for seventy five years, since the Fed was founded, the Fed limited its backing to traditional depository banks. The bailout of Bear-Stearns – an investment firm, and AIG – an insurance company, crossed a line and set a precedent for the future. Second, past Fed practice was limited to temporary lending; the Fed did not buy assets outright. This time, the Fed purchased distressed assets of financial institutions, transferring potential losses from private balance sheets to the public via the Fed.
The size of the Fed commitment is directly related to the large credit share enjoyed by the financial sector. Fed intervention, in size and scope never before seen, has prevented the full effect of a natural downsizing that would have occurred with the bursting of the financial credit bubble. In some instances, financial firms have become bigger and more powerful. The owners of affected debt and some stockholders, are the primary beneficiaries of the bailouts. Bailouts have increased future deficits and potential taxes by unimaginable amounts. The economy’s exposure to financial sector crisis has increased.
NOTE: Credit debt ratios are based on Fed flow of funds accounts, Table D3. The financial sectors share of total credit is the ration of domestic financial sector debt to the sum of domestic financial sector debt, households, and business debt.
“The WSJ today has the data: borrowing costs for large banks are now lower than for small banks.”
I can not tell from the link (I don’t subscribe) what the spread is. Could someone enlighten me please. The sentence implies that small banks traditionally had lower borrowing costs than large banks. Is that accurate, if so what is the traditional spread?
I see this problem as one in which a society (our American society) has lost, almost entirely, its institutional long-term perspective. In all major American institutions, whether private or governmental, the goal has been gain in wealth, power, control, or all three, with no concern for the social context.
This symptom can be clearly seen in Washington, where the political parties are focused not on the general welfare of tghe country and its citizenry, but on winning political battles. Thus, compromise has become nearly impossible, and the whole idea of bipartisanship is possibly at its lowest ebb in the history of politics, at least in the near term. For this reason, the moneyed elite have gained nearly total control of all disputes regarding the resolution of society issues/problems (e.g. healthcare reform, climate change, financial reform, as all essentially at statemates with bargaining focused on creating loopholes, and the debates becoming nearly entirely polarized).
I can clearly see disaster looming in the country’s future, if we can’t somehow regain our moral and social equillibrium. With the size of the challenges facing both us and the rest of the world, it is a very bad time for our leadership to have apparently completely lost its focus. There are a few in our leadership who see this and seem powerless to voice clear conviction of the right path, and in part it is because of the fourth estate. The media, except for a very limited number, appears to have completely sold out to its sponsors to the great detriment of those who rely on clear, even handed reporting.
Wealth wants to concentrate. It continues to do so until it is reigned in or it implodes.
Google ‘carry trade,’ side effect of a ZERP.
When the Commercial Real Estate Market and all the attached PONZI scheme’s collapse, (and the day of reckoning is fast approaching) – all these sniveling, conniving, thieving, criminal operators and oligarchs will come begging, on bended knee’s, shrieking cries of imminent collapse if there are not BAILED OUT, and granted unknown unknown TRILLIONS from the American taxpayer.
The peoples only legal option – out side of the Barret 82A1, (which is my preferred choice) is massive boycotts, and just saying NO!!! No more. No more bailouts. No more underhanded, PONZI scheme irredeemable debt products!!! No more TBTF jibberish!!! NO MORE!!! FAILED institutions, and FAILED models, and FAILED managements must DIE!!! That is the underlying principle of the socalled freemarkets. Now these fiends, shaitans, criminals, and wanton heartless profiteers think and imagine they can continue to reanimate the casino capitalist/ bandit capitalist PONZI schemes, and bubble economies and markets they alone, singularly and exclusive profited from, – only to cash out and heap all the terrible costs, and imponderable burdens and debt when the inevitable bubble bursts on the American taxpayer at the behest of the captured, (as in owned and controlled government).
The predatorclass is like an abusive parent, beating, and raping it’s innocent children!!! Until and unless we stand up and demand NO MORE!!! – the abuse, the beatings, and the rape will continue. I want predatorclass blood, but call me radical, the only other option is massive boycotts of predatorclass oligarch products and services and a massive movement of the peoples determination to demand accountability, and the rule of law from the heartless, abusive, criminal operators fiends, shaitans, thieves, and criminals in the predatorclass.
The people either stand up and pushback our abusers, or the abusers will continue to beat, savage, and rape us!!! Boycott the oligarchs!!! Withdrawl all your funds and accounts and invest in Gold and Silver, or horde cash, or purchase canned food, weapons and ammo and get locked, cocked, and ready to rock! The predatorclass is an arch enemy and dire threat to the American people. We either go like sheep to the ovens, or stand up!!
Ok,let’s say we do all that. Then what? It would take about 3 minutes before we have a brand new predator class, and you and I might even be part of it.
Maybe Marx had it right, but was just a little premature? With the internet and ubiquitous cameras, maybe it can work this time.
See Karl Marx, passim. Must we conclude, then, that the long-overdue crisis of capitalism has arrived? It sounds too simple. And certainly the “working class,” whatever that is, is not ready to step in and govern.
[Picking up the opium pipe]
Brunswick UBS in Russia is endlessly fascinating, especially in light of all the corruption, money laundering and general unpleasantness that UBS seems to have been involved with.
Uncle google puts Peter Boone at Brunswick UBS way back when, to help the Russians with their privatisation (why did they need so much help with this? As Putin would say, “do you think we are invalids?!”) I had it in my mind that Simon was there too. Maybe from this?
“His previous experience includes two years as an Assistant Director in the IMF’s Research Department, co-founding the Africa Project at the NBER, co-chairing a taskforce on Latin American reforms at CGD, helping to run a research center in Moscow, and belonging to the Global Advisory Board of Endeavor, an organization that promotes entrepreneurship in emerging markets.” (His MIT Sloan bio)
The thing that always strikes me is just how many emerging market experts are focusing their attention on the United States these days. Do they see us as an emerging market in the near future as well?
Here’s another old Brunswick UBS “advisor”:
On this page she’s concerned with the Vietnamese equity market. On another she’s “a director of Onpoint Africa Holdings, an asset management firm investing in pan-African equities” Aren’t Peter Boone and Simon involved with an African NGO / Charity?
So what was this Brunswick UBS exactly? Looks like it was started as a brokerage by a swedish fellow named Gerard De Geer, who was once an advisor to Anatoly Chubais. See his wikipedia page, and have a chuckle at how he and his Perestroika associates financed seminars and elections with the proceeds of their tulip farm. And look! Mr. Chubais was a key figure in privatisations, generally considered one of the most corrupt figures in Russia, and was selected for the JP Morgan Chase Int’l Advisory Board last year. Jamie Dimon had some really nice things to say about him.
Ok, back to Gerard. So he was a key figure in the privatisations, just like Goldsmith was in England (with the help of Milken-Money). Where did he end up?
At IK Investments, a private equity company that’s set up as a partnership apparently. (Who really runs it?) Fancy this… they have an office in Jersey, which just happens to be a…. tax haven? Needless to say Gerard’s bio doesn’t mention his old life, and those Moscow nights.
Here’s another Swede at the Russia/Simon Johnson/Peter Boone nexus: Anders Aslund, who co-wrote “Escaping the Under-Reform Trap” with them. (IMF Staff Papers, Vol. 48, 2001)
Anders is now at the Peterson Institute like Simon. His wikipedia page says he’s a big proponent of “shock therapy”
What’s with the Swedes? It’s Swedish bankers that hand out the economic Nobels. Do people use them because they seem to clean and uncorrupted?
A little common sense about and courtesy to our hosts, please. The job of any academic is study, research, publication, and teaching. Prof. Johnson also consults. His faculty web page. His publications (PDF). Problems with an academic web page–especially during summer break–really don’t seem to me good reasons to criticize anyone, least of all someone with as distinguished a record as Prof. Johnson.
BTW, I see anti-Semitic hints about George Soros, a man who narrowly avoided deportation to the death camps after the German invasion of Hungary in 1944, and a survivor of the Battle of Budapest. I would very much like to see them gone.
Croak! What Bayard said!
It couldn’t possibly be worse Uncle Billy vs. Mont Pelerin. Hopefully, the next incarnation of socalled government will hold and have some slightly greater concern for the less fortunate human beings on this earth and in America, and demand that whatever new superturbocharged predatorclass evolves will be constrained by real laws with real teeth, and real disincentives to rob, pillage, savage, and rape their fellow Americans. If not, then chaos is the better answer, and the better hope for poor and middleclass Americans. Anything – and I mean anything – would be a marked improvement on the abuse and predation of the current panjandrum. Your hollow question of what would come nest, belies the horrors of what we confront now. Nothing could possibly be worst. Chaos, insurgency, and/or anarchy would be a marked improvement on the current predatory reality for America’s poor and middle class, – wherein the predatorclass, owns and controls the government – and like abusive parents; enslaves, beats, pillages, and rapes their children, (the American people) at the oligarchs, and governments behest, and for the abusive parents (predatorclass, oligarchs, governments) wanton profit and illgottengain.
we say where doves are, other doves will go to (wo Tauben sind, da fliegen Tauben hin) – but in real life it seems extremely difficult, once that has happened, to get those doves down to acceptable numbers again let alone making them leave the place alone so the sh…t may blow away.
“Nothing could possibly be worse.”
Exactly what many thought in Venezuela ten years ago… and you should see the new predators in action. The predators used at least have to lobby the government, not any longer, now they are the government.
Bayard you are correctly referring to something that many of us foreigners who count on the US being there for the world are extremely worried about. We pray you are able to regain solid ground, though from the sound of the divisive debate going on and were intelligent and educated people feel little or no shame at all about sounding like political pamphleteers, the perspective does not seem too bright.
Take our host Simon Johnson for example. Here we have an intelligent and educated man with who has even been and I quote “the International Monetary Fund’s Economic Counsellor (chief economist) and Director of its Research Department. At the IMF, Professor Johnson led the global economic outlook team, helped formulate innovative responses to worldwide financial turmoil”. And now, just when the world and the US is most in need of constructive proposals, Simon Johnson goes to fish at the bottom talking about bank oligarchs? That the banks have undue influence? Of course, and that goes for many, here there and everywhere, but, how do you combat it? With good and smart counter-proposals.
Raven asks about a little “courtesy to our hosts” and of course we need to be courteous but that cannot exclude not telling it as it is. Simon Johnson, who like many did not speak out in time, God knows why, should with humility be presenting and discussing proposals instead of stoking those fires that can only make things worse. You see one of our biggest problems, especially seen in academic circles is a truly false sense of solidarity with your peers. Face it, you academics, truth is you could have a PhD, and still be about as the stupidest person around.
But, then again, I could also be totally wrong I am just a humble foreign MBA from before the Black-Schole days.
Unfortunately their are pinheads that use the following as fodder for their hate, but this guy has done so much (unfortunately poorly documented, yet still verifiable) research, that it’s a shame not to repost it.
The author, Engdahl, is a graduate of Princeton and Stockholm U, for those who crave cred.
I used to think “could the United States really have been taken down just so Soros and friends could make a buck?” Of course the answer was, “nah.” But if you look at his history, the mind boggles anew.
A sobering post Bayard,
Would you mind expanding on the earlier moral and social equilibrium state and when and why you believe it was degraded?
Also do you have any thoughts about how the regaining task could proceed?
Finally can you identify causes of the problem you see and what blocking factors may oppose the regaining of the desired moral and social state?
Thank you again for your post
Bayard writes “The media, except for a very limited number, appears to have completely sold out to its sponsors to the great detriment of those who rely on clear, even handed reporting.”
Absolutely, the rational have been condemned to Speakers’ Corner and all those previously on Speakers’ Corner are now invited to prime time to boost ratings.
I wish somebody would put all those marvels in the above on a monopoly board with all those old and new threads between them so one could “amuse” oneself with observing where a nudge here or there finally comes to a halt – what a sight that would be – and you had to content yourself with those who had bios online …
– in Lieschen Müller’s (German female Joe SixPack) understanding that would be any market where emerging profits would be worth a raiding party
This is about the 6th comment too many, but the coincidence is just too much to resist. Check out who provides the headline endorsement for “Silent Takeover”
“If not, then chaos is the better answer, and the better hope for poor and middleclass Americans.”
history tells a different story – unfortunately – chaos hurts the “little ones”
– they have no castles or islands to go to to outlast the storm and more often than not the little ones, once they got going, tend to go after their neighbours also
Indeed, but our current predator armed with a loaded oil-checkbook does not stop chaos either!
you are right, totalitarians in the widest sense do not provide order as is commonly believed they need insecurity, lack of certainty to stay in power (just getting glimpses of the organization chart of the RSHA, Eichmann’s outfit, makes one comprehend a lot) on the other hand they are good at upholding the myth that everything is under control and in order to be able to uphold that myth chances are good that there is in fact more order than the period of total chaos would provide during which the potential patriarchs/matriarchs/clan chiefs fight out the who owns what.
Everything is going to be fine. http://www.theElders.org is going to make everything ok again!
“The WSJ today has the data: borrowing costs for large banks are now lower than for small banks. This is, of course, a direct reflection of the government’s firefighting/firesetting strategy: unlimited cheap resources for large big banks; for small banks, not so much”
The banks in control of the Fed seized the crisis as an opportunity to squeeze even more market share and grow in size at the expense of everybody else.
I’ll bet you my last kwacha, (Zambian official currency) that this became the Plan:
Big banks were to grow much bigger at the expense of the smaller banks. Political parties deciders were happy to oblige: more ‘mo for their coffers, more entrenchment into the power structure. Fed’s higher ups would be looking at even more lucrative careers down the road. (Almost) Everyone would be happy…except those pesky serfs, the so-called American People.
Could it be why the powers that be at the Fed are so terrified of an audit?
That’s Lyndon LaRouche’s organization. LaRouche is the wingnut’s wingnut.
Want to empower democracy and empower the future? Then One-Child-One-Vote! Stop the Baby-boomer dictatorship!
Want to give democracy in oil-cursed countries a chance? Then stop offering false hopes with aspirins like more transparency and start asking for the citizens to receive the oil revenues directly.
Want to help the financial sector to help to move the world forward? Then tell the regulators that risk-taking is something to be stimulated and not taxed.
Notabanker, I thought of you when I watched this video over the weekend. When the Moors Ruled Europe. Let me know what you think.
This talk of predators reminds me of Paulson’s quote from the early days about how if you want to gauge the health of an ecosystem, look at the creatures at the top of the food chain. If the topfeeders are healthy, all is well! I always found this troubling.
I have recently learned much to my amazement here
that the muslims in Andalusia had three waves of conquest from North Africa, the first creating the El Andalus which this video obviously presents as the only El Andalus but then came a second wave of severe fanatics and a third less so – to depict a history of seven hundred years as being ruled by one mind-set does not seem so accurate to me after that
If I’m in a position to borrow big bucks today, its likely because I AVOIDED levering up ahead of the collapse, not because I can get some special dispensation from my lender.
Ten months of frantic money creation and spending by the Fed and Treasury are having the desired effect of putting a floor under consumption and production.
Cynics would sum up the forces behind this improvement as a tale of two payoffs.
In the months immediately following the
September 2008 panic, the Republican
Bush administration paid off their financial
market constituents by drastically
expanding the Fed’s balance sheet, rolling
out the TARP for the banks and inserting
a large cash funnel into AIG. Markets shuddered and
then stabilized. Payoff number two came in the spring,
when the newly-elected Obama administration and the
Democratic congress repeated the favor for their state
and local apparatchiks in the form of a $787 billion
stimulus package. Recent figures on Federal spending
show a majority of the stimulus money spent so far has
gone to financially strapped states and localities.
J.H. Elliott reviews (New York Review of Books,August 13) several recent works on Iberian history that examine the multi-ethnic, multi-religious society from the Moorish conquest through the ‘reconquista’. The character of mos-arabic Spain has been a central subject in Iberian history for a century. An older work still worth reading is Americo Castro, Espana e’ su historia (english: structure of Spanish history) but there’s a huge literature.
Thank you tippygolden, I appreciated the architectural review of some beautiful Spanish buildings. I think I ended up in the longer video.
Re the sales pitch for Islam, I presume you noted the glossing over of the conquering of other lands, taking their possessions, the omission of specific Koran commands to apply ‘convert or die’ to advance Islam? A minor point made of taking Egyptian and Greek knowledge which illustrates Islam’s real, historic innovation – taking other people’s property.
It is remarkable that Islam has to retain control by killing converts from Islam even now and kidnapping of Christian girls in Egypt etc!
In summary a clever video but massively untruthful. You probably are aware that Muslim teaching makes a virtue of lying if Ialam is benefitted!
However it may serve to support concerns expressed by Bayard (I can clearly see disaster looming in the country’s future, if we can’t somehow regain our moral and social equillibrium). We seem obsessed with technical market operations and individual gain unregulated in any way for society’s safety. We see ‘goodness’ in fiercely resisting any suggestion that application of ethics and social protection is even acceptable as a discussion topic? Thank goodness general good is a primary concern with aviation regulation, road usage etc.
I would very much appreciate your thoughts re Bayard’s concerns.
Thanks again for the video link.
There is an element of humour for me, in the “notion of a two-track economy taking hold” – This is an idea so similar to one that I wrote about in university papers (none ever published or posted – no need to google!) back in the early ’80s (yup – last century)- after the Third World Banking Crisis and 20 percent interest rates. I wanted to write about theoretical issues relating to the then obvious divergence of the “real economy” and “financial markets” – However, this was so shocking an idea at that time that I was invited to quit the subject or ‘not be permitted’ to pursue it any further anyhow. So life goes on…. Sorry if this comment is off base – but since I’m so old it seems funny now – And it is such a relief that the idea is finally taking hold! However, it is not at all funny that over the past decades so many people have suffered through several financial down-turns and the related joblessness, homelessness and ill-health that goes with such hardship. It is not funny that generations of children are catapaulted time and again into physical insecurity while the “predator class” is allowed to just keep on growing.
Reading everyone’s comments over this past weekend has been entertaining and educational! What I am left questioning though is – where is this virtual public inquiry going? (I wonder about this in intellectual terms – not ‘tea bag’ action taking of any sort !) If there is a major gap between economic theory and reality – what is being proposed? Ditching liberal economics likely leads to ditching liberal democracy (since theory on democracy exists quite precariously through a few ideas vaguely held in common amongst a number of competing schools of thought) – and we’ve agreed in previous discussions that we are not so keen to follow the Chinese model.
Do we just give up on the concepts of human rights and human equality and let whatever “predator class” is going to rule just ‘do their thing’ because it’s inevitable? Improved regulatory practices, as discussed in previous posts at this site are hugely important. However, what sort of intellectual framework is going to support this societal change and also help lead to a higher quality of life that is in balance with our environment? Do we just give up on the idea of intellectual change possibly leading towards a higher level of civilization?
Is there an intention to use the ‘notion of a two-track economy’ to a theoretically contructive end?
Look forward to reading more!
“what sort of intellectual framework is going to support this societal change … ?”
Good question! One that needs to be asked.
What is LaRouche’s organization? Engdahl used to be affiliated with it, but apparently left exactly because LaRouche is nutty. Unfortunately Engdahl has undermined his own credibility by pushing a theory (wikipedia) that oil doesn’t originate the way we think it does.
Don’t discount everything wholesale, Raven. A common trait of the tin foil set is that they often dig important things up in their quest to justify themselves.
“A minor point made of taking Egyptian and Greek knowledge which illustrates Islam’s real, historic innovation – taking other people’s property.”
I would not say the Moors appropriated Greek knowledge. Rather, as a desert people they learned from the Greeks and they built on this knowledge. We take Arabic numbers (ie, 0 1 2 3 4 5 6 7 8 9) for granted. This is an Arab advancement in mathematics that Europe adopted.
Spain under Moorish rule is considered a high point in history for its cultural refinement, learning and tolerance. So there there can be a very different perspective on Islam compared to the views you express.
As for your question on Bayard’s views: I think many of us here are interested in the moral and ethical dimensions underlying the near collapse of the world banking system.
What sort of intellectual framework is going to support this societal change? Indeed an essential question to answer.
May we assume that friend Bayard’s posting offers a possible start point for such discovery?
Is the objective: To determine an intellectual framework which will enable us to recover and maintain our moral and social equilibrium. Then to deploy this across our social functions?
If we are to ‘recover’ or ‘regain’, it may be helpful if we were to:
1. examine previous times when the desired attributes were present? Invention is great but re-invention is maybe not so smart?
2.agree desired benefits (outcomes)?
3.then commence defining the intellectual framework?
Project rigor will best be served if we define the outcomes to be achieved before we start seeking to deliver the outcome?
I am encouraged that folk are prepared to explore possibilities. This may well be a major improver for the current problem set and Simon and James may even treat as a catalyst for some initiatives?
Bayards’ eloquant post cuts to the heart of the issue. Our government is no longer one in which it’s consent is derived from the consent of the governed. Rather, it is a captured and owned government, a corporatist government, wherein all the resources and focus of the government is directed toward propping up, bailingout, protecting, shielding, and advancing the predatorclass, 1% of the population, the superrich, and the predatorclass oligarchs. Any cursory examination of history proves, the kind of real change that America must endeavor is not realized through political enterprizes, nor are these necessary changes, pretty, orderly, or bloodless. The revolutions of the past may not hold in relevence in this information age, but some kind of real horrorshow revolution is necessary to shock the system and the greedy, obdurate, heartless powersthatbe, (predatorclass) into recognizing that the rest of humanity has “…certain inalienable rights, and that among these are the right to life, liberty, the pursuit of happiness – That to secure these rights Governments are instituted among, deriving their just powers from the consent of the governed, that whenever any form of government becomes destructive of these ends, it is the RIGHT of the people to alter or abolish it, and to institute NEW GOVERNMENT laying its foundation on such principles, and organizing its powers in such form as to them shall seem most likely to affect their safety and happiness” We need a real revolution!!! The predatorclass has abandoned us, shat on us, raped us, robbed and pillaged us, and breached and spoiled any social contract that formally existed. We either reign in the illgottengains and untoward powers of the predatorclass, or the Amerika we bequeath our children will be one like fascists Italy or Germany, or any society throughout the long and bloody history of this world that is brutally abused and dominated by viscious bloodthirsty, soulless tyrants.
These changes will not come peacefully, nor without some chaos, and tragically – there will be blood, – but real horrorshow revolution is the only hope for poor and middleclass Americans.
“there’s a huge literature”
no doubt there is, and John Julius Norwich never claims to be anything else than somebody who condenses the vast literature into real page turners without ever using the gimmicks of thriller writers like for example cliff hangers.
by the way Norwich is the son of Duff Cooper, one of the men who stood up against Chamberlain’s appeasement – quite a speech he gave before he resigned … and his son writes books that are not interested in adhering to the now demanded pieties of the Zeitgeist but in coming as close as possible to the why and how of real events
maybe you want to have a look at this http://en.wikipedia.org/wiki/Adelard_of_Bath woefully short though it is
this Adelard went all the way to Norman Sicily to get educated there by Arab Scholars, but probably Greek and Latin too – and where by the way they felt sure that the earth was round – he became the pioneer of Arab studies in England
I find it unwise and incorrect to say Islam has ALWAYS behaved like the fanatics of today do
it had its fanatic and its humane periods just like all others with a chance to wield power and viewed in the context of ancient times it had as much “right” to try to conquer Christian lands as the Christians trying to resist and reconquer notwithstanding that this Isabella must have been quite a nutcase (did you know that muslims at one time sent such a number of ships from somewhere in the north (Genoa?) to rescue Spanish Jews that trade on that part of the Mediterranean suffered considerably
I object however to it being told as if ALL ancient Greek knowledge came to us through Toledo i.e. Arab translations – a lot was picked up inter alia by this Adelard in Sicily which was after all not only full of mosques but also of Greek monasteries full of manuscripts. Another lot came through Mistra on the Peloponnese to Florence after the fall of Constantinople giving a kick to the renaissance. Both “injections” I am hardly ever told about
maybe you want to have a look at this http://en.wikipedia.org/wiki/Adelard_of_Bath woefully short though it is
this Adelard went all the way to Norman Sicily to get educated there by Arab Scholars, but probably Greek and Latin too – and where by the way they felt sure that the earth was round – he became the pioneer of Arab studies in England
I find it unwise and incorrect to say Islam has ALWAYS behaved like the fanatics of today do
it had its fanatic and its humane periods just like all others with a chance to wield power and viewed in the context of ancient times it had as much “right” to try to conquer Christian lands as the Christians trying to resist and reconquer notwithstanding that this Isabella must have been quite a nutcase (did you know that muslims at one time sent such a number of ships from somewhere in the north (Genoa?) to rescue Spanish J..ws that trade on that part of the Mediterranean suffered considerably
I object however to it being told as if ALL ancient Greek knowledge came to us through Toledo i.e. Arab translations – a lot was picked up inter alia by this Adelard in Sicily which was after all not only full of mosques but also of Greek monasteries full of manuscripts. Another lot came through Mistra on the Peloponnese to Florence after the fall of Constantinople giving a kick to the renaissance. Both “injections” I am hardly ever told about
“what sort of intellectual framework is going to support this societal change … ”
according to Arnold Toynbee through the millenia it was via religion that this framework was provided (he counts communism as a Christian step-child – I am sure he had no love for this step-child)
let’s hope that if there is a framework that will take the lead it is benign to people who will adhere to rules but not confess to the same stuff.
Does it suggest how to topple the corrupt?
The EIR, who published the linked article, is LaRouche’s. Whether or not Engdahl has since cut his connections with the EIR, that’s who first published that article. I read a lot as it is. I’m not going to spend time on what seems to be anti-semitic crackpottery unless it comes from a much more reliable source than the EIR.
I can appreciate your cognomen!
Benigne dicis amicus.
I might add here, I used the phrase “Arabic numerals” above. But this notational system actually originated in India, circa 500 CE, using the Devanagari script. So it was mathematicians in ancient India discovered the concept of zero.
Devanagari is the script for Sanskrit. While philologists have shown Sanskrit, Greek, and Latin are linguistically related. This begins to illustrates just how interconnected the known world has always been from a cultural and historical perspective.
I spent many years before retiring travelling in Asia and have many friends over there. It has been interesting studying Islamic and Hindu belief systems, history and society over a period of about 30 years (with some side tracking to China and other countries in the region). Some of the Indian prehistory research is fascinating. However Simon and James’ blog may prefer one to concentrate on the subjects raised, however tempting sidetracks are?
Hopefully we might see Simon address the requirement to protect against exploiting market mafiosi while getting the balance right for maximum market freedom. Maybe a shell of ‘safety’ processes could be developed?
I confidently expect your contribution to be of great value.
Thanks notabanker. To tie this together. The invention of counting began in ancient times because people needed to to keep track of their bushels of wheat and olives. This evolved into the oxymorn of modern accounting. By this I mean the Shadow Bankers that caused the global financial crisis but evaded accountability.
Thank you Silke – What an interesting reference. I have not read Toynbee so followed up reading a few excerpts online. It’s now on my list of stuff to read!
However, in terms of intellectual framework I am imagining something that is temporally dynamic…Historical analysis on its own can result in deterministic philosophy. As TonyForesta illustrates in the comment below, when we have knowledge of the forces that shape historical events, we end up with predictable outcomes, such as revolutions that appear necessary for creative change (Toynbee discusses creativity as such). Since this is repeated again and again in history, it is like a circular function that is effectively static through predictability. Why not do everything possible to avoid such prediction – especially if there is “bloody” outcome…as described below? I just don’t think we should give up on the notion of intellectual progress for humanity beyond Marxist musings or other alternative theories of previous centuries…
sorry language gap hit me on “circular function” (http://www.merriam-webster.com/dictionary/circular+function)
but from what I think I understood:
Intellectual progress we may make without end but our emotions remain pretty close to what they have been centuries and centuries ago (why else do I immediately and unequivocally side with Achilles’ rage if not because I find that same reaction repeated in every slighted employee’s “innere Kündigung”=inner/silent notice giving)
I read Toynbee almost 40 years ago but another thing that stuck in my mind was his conclusion that civilizations do not really progress but that religions have progressed over the millenia towards transcendance (first you worship the sun, than a god with the attribute of the sun, etc. etc.) as at least the religions of the book have come a long way from the constantly squabbling Olympians I wonder what mankind will come up with – as far as I know back to fundamentals does not have a record of impressive success over times, so my bet is on something even more up, up and away (definitely not atheism, far too dogmatic in my taste).
I am woefully uneducated about Marxism but completely convinced by everyday experience and avid reading of history books that pre-determinable outcomes of anything whatsoever can only ever be “found” in hind-sight, that’s why I prefer historians who write their “why something happened”-stuff always with implied question marks
you tempt me to post another comment. Yes Muslims at least in Pakistan (and I believe Yemen) refer to numeral system as Hindu or
Hindi as I recall but the symbol structure was originally a little different to our current ‘Arabic’ style. Hindu records speak of origin in the Vedic period.
You may be aware of Hindu assertions that the Kaaba was originally a Fire temple! They point to the unique practice (amongst Islamic sites) of processing around a shrine, stoning a pillar, venerating a stone, as fire temple rituals. None of these were apparently included as unique instructions to Muslims? I advise this for interest and have not researched references. My info was received verbally.
History is replete with major trading and social contacts between Arabia inhabitants and the Indian sub-continent.
Some study and research difficulties arise with revisionist action by various folk attempting to rewrite history. This has been only partially suuccessful. Early Kaaba residents (pre-dating Mohanmmed) apparently were headed by ‘the deity'(check this in Arabic), his consort and their two children and a number of others. Hindu info contributions provoke re-thinking of later claims?
I pass this for interest and make no claims re authenticity however there appears significant correlations? It may be helpful if independent examination of Kaaba artifacts and the site itself were allowed. Some Islamic folk claim the Kaaba was originally built by Adam, others that Abraham aged about 140+ traveling about 750 miles each way, did the job and then returned home to Canaan! Such claims seem to have surfaced about 2500 years after Abraham lived. No authenticated supporting evidence exists to my knowledge.
Recent investigation of sunken city structures off the west coast of India allegedly date from at least 7000-10000 BC appear to indicate a society older and more developed than the nomadic Arabian peninsular peoples.
You may care to make your own investigations re this fascinating period although information is scarce.
I trust this post does not result in emotional responses.
Isn’t life interesting?
my comment re ’emotional response’ did not not not apply to you. I did not want to upset other folk.
the only book I remember about the connections you describe is Amitav Ghosh’s “In an Ancient Land” – do you have any other suggestions??? (hopefully by writers who write well enough to make a hedonist reader sigh with pleasure while consuming them)
I hope this does not count as an emotional response ;-)
Comments are closed.