Capitalism destroying itself.

[MediumTex]

Would China today be considered a fascist state?

[stone]

I think it is nonsense to say that the Danish economy is based on Denmark having lots of natural resources for its population size. That is true for Norway (and the Congo and Zimbabwe) but not for Denmark. http://en.wikipedia.org/wiki/Economy_of_Denmark
"With very few natural resources, the economy of Denmark relies almost entirely on human resources. The service sector makes up the vast amount of the employment and economy. Its industrialised market economy depends on imported raw materials and foreign trade."

I try and avoid the "is it left wing or is it right wing" attempt to pigeon hole ideas because I fear that rather than clarifying things it just limits clear thought. It is a bit like people dismissing the PP because it holds three "high risk" assets and so must be "high risk".

Similarly I think the "slippery slope" argument about taxes leading to despotism needs to be headed but should not stop us taking the first few steps and then stopping. We all recognize that we need to eat but also realize that if we eat too much we will become "500 pound shut-ins".

I guess we all need to look at how miserable political systems came about in history and try to avoid contributing to repeating those mistakes in our own countries.

[stone]

Would China today be considered a fascist state?

posted for your consideration without commentary,

http://www.taipeitimes.com/News/editorials/archives/2010/03/12/2003467801

This artical had some food for thought:
http://www.macrobusiness.com.au/2011/10 ... al-vs-you/

"I should explain that I regard Marxism as wicked, directly responsible for some of the worst horrors of the twentieth century. I have many other objections to it, which I will come to later. There is, however, a difference between Marxism and what Marx wrote. And there is a difference between Marx’s critique of capitalism, which has some prescience and relevance, and Marx’s political prescriptions and revolutionary impulses, which were riddled with contradictions and, in practice, wholly pernicious."

[TripleB]

storm take a look at the images i posted above showing the political spectrum as a circle, i am not claiming Fascism is left wing (i would probably classify it as being the same ends by means of a different ideology) but when viewed this way it is far closer to and has more in common with communist totalitarian and is on the opposite side from both modern liberalism and classical liberalism (conservative)..

I'd argue that all governments are fascists. It's just a matter of severity.

Sure, most Americans would argue that China and most Middle Eastern countries have fascist governments because women can't vote, or the government tells you what you can see on the internet, etc.

In the US, Gays can't marry. If we bring that up here in the US, we get people talking about how the Bible says <insert ridiculous bullshit that was invented 2000 years ago to control stupid people>.

But if the argument goes the other way, and Middle Easterners discuss Islamic Sharia law as the basis for what we find as fascist, then we find them to be backwards people for believing what a stupid 4000 year old book says and writing laws about it. Yet we don't see the hypocrisy.

Governments can do 2 things:

1) Protect people from other people
2) Oppress people by other people

The bigger the government, the more protection, but the more oppression. Sure we can have Universal Healthcare (protection) but Customs agents can look through your computer, without probable cause, for child pr0n to make sure you're not a terrorist or pedophile.

Sure we have police officers to help us against criminals (protection) but we give up gun rights for officer safety (oppression), because police officers are "the only ones professional enough in this room to carry this Glock .40" (then the DEA agent shoots himself in the foot with his own gun).

I'd rather live with less oppression at the expense of less protection. Give me the smallest government possible. Let me do my own thing. If I fail, don't bail me out. Otherwise I'll go in thinking failure is OK and start doing stupid things. Don't reward me for incompetence or incompetence is what you'll get.

[Tortoise]

I'd argue that all governments are fascists. It's just a matter of severity.

The fasces, originally a symbol of the Roman Republic, later a symbol of fascism and, in general, of government power through unification:



Note the fasces on either side of the center of the U.S. House Chamber:



Also note the fasces on the reverse of the 1936 U.S. Winged Liberty Head (Mercury) dime:

[Benko]

Agree with a lot of what TripleB said.

It has been said that the most important division is into those who want to control other people and those who do not.

And for another way to divide things see:

The Pournelle Political Axes
http://www.baen.com/chapters/axes.htm

Jerry Pournelle is a science fiction writer (frequently with Larry Niven) and long time computer columnist.  His blog is always worth reading:  http://jerrypournelle.com/jerrypournelle.c/chaosmanor/

[AdamA]

It has been said that the most important division is into those who want to control other people and those who do not.

That's a great quote.  Who said it?

[rickb]

It has been said that the most important division is into those who want to control other people and those who do not.

That's a great quote.  Who said it?

"Political tags -- such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth -- are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire. The former are idealists acting from highest motives for the greatest good of the greatest number. The latter are surly curmudgeons, suspicious and lacking in altruism. But they are more comfortable neighbors than the other sort." – Robert A. Heinlein

It's from the Notebooks of Lazarus Long, in Time Enough for Love.

[stone]

Adam "It has been said that the most important division is into those who want to control other people and those who do not"

At an elemental level, what does it mean to own things? For me it is hard to dissentagle owning anything from controling other people. For me to say that I do not want to control other people amounts to me saying that I do not want to own anything. Money is essentially a tradable command to other people to hand over their possessions or labour. Wanting to exersize power through money could be seen as just as anti-libetarian as wanting to exersize power through direct state dictat.

I've also been struck by how similar the Austrian School critisms of credit expansion are to Marx's critism of "fictitous capital". Marx and Ron Paul sometimes seem much the same.

[moda0306]

stone,

Your point on property points to the fact that deeding land is a form of controlling people, and most private property is built on that basic idea.  If government has the authority to recognize private property in the form of something that's been here before any of us were, than that is definitely a form of control that I can't reconcile with the principals of libertarianism.  I'm not saying it isn't important and appropriate to deed land, but simply that it isn't natural private property, and shouldn't be looked at as the government simply protecting what is someone's personal wealth.

I think it's a little unfair to make all forms of government outside of private property recognition and defense out to be tyranny, but ignore the fact that private property isn't simply a recognition of creativity and accomplishment, but a distribution of things that aren't/weren't anyones to begin with for purposes of societal order and prosperity.

[stone]

moda, I wonder whether it extends much deeper than just land deeding. Imagine you develop some new medicine and as a result get rich. You have created something new and yet the value of your new creation means that you have gained control over other people. You can decide to employ someone to cary you around in a sedan chair if you fancy. You could buy a rival football team, sack the manager, put in place one of your choice and keep all the star players on the bench so that the team you support wins. I'm just giving silly examples but it is true that money is power. Wealth does wield power. Even rich people who don't much care to wield power can not avoid inadvertently wielding power. Whatever is or is not done with wealth has profound consequences.
When MMTers say that government debt is a nice thing because it is private wealth, my hackles rise. That amounts to extra claims over all of us.

[stone]

moda, when capitalism is working well it is because control is flowing to those who are providing what is valued. Its a virtuous positive feedback loop BUT it does entail control over other people and, being a positive feedback loop, is unsustainable.

[moda0306]

I wonder what the role of a "dollar" asset truly is.  In a world without a fiat currency, assets would be made up 100% of hard assets (and intangible ones, of course), but not these pieces of paper backed by the military's ability to put you in jail if you don't pay taxes with it.

So to say these things have a real "value" that's not offset somewhere else would seem odd.  This would seem to imply that simply by threatening a negative (being put in jail because you didn't pay taxes in the US dollar), you can "invent" value out of thin air.  The mere threat of a negative makes a positive?  I don't think so.

I think where the inherant value of a fiat currency comes in is in its ability to be more operationally efficient than any alternative.  The need for a medium of exchange could be considered a market failure.  Much like the need for government to pave roads for ease of transport, coming up with an efficient medium exchange seems like it could arguably be something the gov't should do to make society function more efficiently.  Of course, one could argue gold serves this function well enough and therefore my point is invalid.  That said, absent a substance like gold in a society, we truly would be in a pickle at some point if the gov't didn't grease the wheels and come up with an efficient medium exchange.  Beaver pelts only work for so long.

The thing is, regardless of what these things' value would be in a vacuum, almost all the value exchanged in our country is for dollars, and almost all the debt is denominated in dollars, so to move forward, the solution will almost certainly have to be taking that into consideration.  We are simply not going to start bartaring valuable services overnight on a broad scale, though we will probably see more of that.  Likewise, almost all of our "savings" is denominated in dollars.  We don't denominate our savings in coconuts or rice.  This is where the "net financial assets" thing comes into play.  These dollars have value in our society because our entire economy and gov't has been built around contracts denominated in the dollar.  Of course we want our economy to produce real value (not just make-work or green pieces of paper), but if that value is 99.5% of the time going to be produced by person/corp A for the use of person/corp B, it's almost definitely going to be exchanged for US dollars.  If there is no dollar there for person/corp A to add that value, then they'll likely sit and wait, unfortunately, and as stone has mentioned, a days-worth of labor can never be reharnessed once it's gone.  This is wealth that could have been created (real wealth, not just green pieces of paper) that wasn't.  The thing is, those green pieces of paper is what they were looking for in exchange for their wealth-creating skills.

Does that mean printing up a bunch of dollars is adding wealth to our society?  No, not directly.  Likewise, motor oil does not add directly to the power of an engine.  Starve an engine of oil, though, and realize that it starts to run rough.  It was built to run with the right amount of oil running through it.  Right now our economy is suffering from a lack of demand and a lack of private savings.  For the life of me, I don't see how starving the economy of enough dollars to satisfy both our demand for savings and to use up the capacity our businesses are able to add to society will result in more savings or more "real" wealth, both of which being the main target of the deficit hawks and inflationists.

[stone]

moda when you say "Right now our economy is suffering from a lack of demand and a lack of private savings." What do you mean by the lack of private savings? Are you meaning that the USA owes more to China and Japan than vice versa or that US households owe money to US corporations? If a household is in debt then that debt is owed to someone. A lot of US debt is owed to other US citizens though often indirectly via debt to corporations.

I worry that messing around with the medium of exchange does not actually put things on a better footing but simply kicks the can down the road allowing the problems to become more serious. Money is what determines who does what and the problem is that that decision power (money) is not distributed in a way that leads to a politically acceptable outcome. Making money more slippery and nebulous by expanding the money supply simply acts to transfer power to those who specialize in understanding and exploiting the nature of the tricks played and so transfer power away from those who are creating real goods and services.

[moda0306]

I mean that many of our citizens haven't saved enough to safely get them through retirement or tough economic times, and/or taken on too much debt.  I understand all debt is offset by someone elses financial asset, but the problem is moreso that the debt has been acquired without the fundamental economics to service it, or at least not service it very well.

Part of the problem is that other countries are absorbing what would be our savings if not for us buying foreign goods.  Then they do the saving instead of us.

I don't know what you mean by "messing around" with the medium exchange.  Putting otherwise idle capacity to work isn't necessarily kicking the can down the road... maybe simply "waiting out the storm more efficiently," with the possible side-benefit of maybe ending the storm sooner.  Things like QE seem like really soft adjustments when you really think about what they are, fundamentally.  Trading short-term bonds for cash simply isn't changing much of the economic make-up.

I think what we see today is what I call a "trifecta of unmet demands" where 1) savers are desperately seeking willing borrowers which is being unmet by businesses and individuals because of demand for products and debt overhangs, respectively.  2) businesses want demand for their products and services, but other businesses and individuals demand less because of the aforementioned demand/debt issues, and 3) people want to put their skills to work, but businesses aren't hiring because of those same issues.

None of these demands can realistically be met efficiently or quickly due to the frictions with the other two.  This is just the self-fulfilling nature of recessions where many depend on employment to spend.  At the very least, the gov't could acheive very cheap financing and labor for the time being to develop the infrastructure necessary to allow future growth (which will be better off if the roads are already expanded or the rail lines already built, so as to avoid congestion).  That's pretending there's no real stimulative effect, but it's easy to see that there probably would be.  The gov't can borrow money, giving savers what they want.  Further, it can hire people directly and buy from businesses who will in turn hire people.

Is it really "good government" to ignore the obvious opportunity that's presenting itself in a recession like we have now just to avoid kicking the can down the road??  I hardly see capital and labor going to waste day-by-day as being a smart plan for the long-term.

I'm not saying perpetual growth is possible.  I realize our economy will reach limitations based on our ecosystem and other factors.  This is something I haven't fully reconciled with my generally MMT view on spending right now, but that aside, it seems to me that we are better off with a government that realizes when its financially smart to do long-term projects, and to me, the time is now.

[stone]

moda "Things like QE seem like really soft adjustments when you really think about what they are, fundamentally.  Trading short-term bonds for cash simply isn't changing much of the economic make-up."

I'm totally with you about the tragic waste of people's willingness to work not getting linked into their and other people's requirements for goods and services. I just don't think measures such as QE or deficit spending address that problem in an effective way. As far as I can see, QE just drives commodity price volatility. It does not help create jobs at all. You could have a big road building and optical fiber laying program as they did in Japan. That is great if you need new roads etc. The problem is that you build all the roads you need, then you build a load of roads that you do not need (as they did in Japan) and then you are back in the same position. The other problem is that in the UK we have a penchant for letting public spending flower into balooning beaurocracy rather than roads. The orgy of public spending we had over the last few years actually made life very hard because the beaurocrats worked extremely hard at making everyone fill in forms etc. Basically the NewLabour vision seemed to have the UK economy as the City of London as a global vampire squid with taxes on that being used to pay for legions and legions of people devising pointless forms and ever more complex webs of cross accountability. It was like that movie Brazil. Your FDA in the US seems to be a match for our beaurocrats. From what I hear in Japan they also got a massive amount of beaurocracy along with the roads to nowhere.
When you have an arithmetically impossible system (as we seemingly have) events get forced to shift the parameters until the system attains arithmetic compliance. My fear is that if you doggedly and determinedly force things too far, the events required to get things rebalanced become ever more tragic. I find it chilling how WWII "solved" the great depression. I appreciate that a citizens' dividend/asset tax combination goes against many cherished pilars of what consitutes a just system. It does come accross to me as one way of having things self balancing. I wish long term balance was more in people's minds when they were considering economics.

[moda0306]

I don't think QE expands commodity speculation all that much.  If institutions were holding 1 year treasuries at .3% interest, converting that to cash is hardly going to induce them to all of a sudden go out and buy uranium futures.  Am I missing something here?

I really don't like the idea of building things we don't need, but I think there are plenty of repairs and improvements that can be made out there.  Even if existing roads are "sufficient," if a bit in need of work, they could possibly made much more conducive to the existing or future economic activity in the area.  There are many road systems that are simply not designed for the amount of activity they have on them.  Until congestion lightens up around the country, I think there is still more that we can do, in general.

If our economy starts to grow again, it will be harder than ever to do meaningful transportation revisions, as 1) labor will cost more, 2) financing will cost more, and 3) trying to repair roads increases congestion while the project is underway... it's MUCH better to plan in advance and do the work before it's in absolute crisis mode.

Beyond that, I think sending checks out to people or lowering payroll or ordinary income tax rates are all sufficient options.  While not as "Keynesian" as some think is effective, this form of stimulus at least adhere's more to personal choice and will be less likely to be at the whim of crony capitalism.

From your posts I tend to think that you see deficits as promoting harmful speculation.  I don't see the deficits in and of themselves as doing that, so much as the moral hazards that develop as a result of poor regulation, bad incentives and market tinkering (pushing home ownership), and natural private-sector "informational assymetry" exploitation.  I tend to think that these moral hazards more often direct the flow of private sector credit than deficit dollars do to inflate these bubbles.  Set up bankruptcy law and limited liability structures incorrectly?  You'll see a lot more shady business operations.  Guarantee loans made for homes, schooling or business, you might see way too much private-sector credit directed in that direction.  I have a feeling the actual level of deficit spending is probably far behind these more detailed legal areas where moral hazards go to breed.

[stone]

moda, whether monetary expansion promotes speculation is certainly a key issue. If someone asked you whether it made sense to invest $1M in silver (or anything wildly volatile), don't you think the answer would depend on whether you had $10M of "free" money to buffer the volatility against? If money had zero opportunity cost then any amount of volatility would just be a volatility capture money making bonanza. By contrast, if money really was limited to what that purchasing power meant to someone on the median wage, then forgoing any of that would be a substancial opportunity cost and you would demand a sound CAGR from every penny.
From what I can see, in the absence of monetary expansion, a prosperous economy would give a low P/E stock market, low property values but high rents etc etc. Money would have a scarcity that represented the real value of people's labour and natural resources.

[moda0306]

stone,

I agree that there's a preferred level of scarcity of currency.  I tend to think that monetary expansion isn't as "expansive" as some do.  Rates aren't just low because the fed says so.  They're low because there's a huge amount of loanable funds and few people interested in borrowing.  There is a very solid supply/demand effect at play here.  Rates simply would not be 6% if the fed wasn't pushing low rates.

All said, I tend to think of monetary policy as massaging a market that's already decided where it wants to be.  People WANT to hold non-volatile cash-like balances at banks.  People WANT to pay down debt much faster than new people want to borrow.  Interest rates may seem sickeningly low, but based on the supply & demand for loanable funds, to me they don't seem that far out of line.

I tend to think that once somebody accepts that currency levels need to rise and fall to the needs of the economy in a way that gold can't provide (if you even believe that, which I know many do not), then one needs a set of statistical or societal indicators to help decide what to do with monetary and (more to my liking) fiscal policy.  What should those indicators be?  Well, I tend to think the combination of unemployment and inflation are both extremely appropriate.  Both are very solid indicators to frictions that exist in our economy that we are trying to solve by not having a hard currency (once again, I realize some disagree with this... just speaking from the perspective of someone who thinks that a medium of exchange in a modern economy is something not best left to a metal, with the exception of it being a great idea for central banks to hold gold).

If we're not using a combination of inflation and unemployment then what do we use?  A constant expansion based on gdp level?  I believe even Milton Friedman believed that lack of monetary expansion during the depression made it much worse.

[stone]

moda, to me it is all about wealth distribution. All the rest of it is just band aid attempts to cope with symptoms of how wealth is distributed. The great depression was because a few people owned everything and so had no customers who were able to afford anything they tried to sell. WWII cured the great depression because the waste and destruction and the subsequent taxes required to pay for the waste and destruction rebooted the system. The subsequent "golden age" of growth was because the starting point was one of widely distributed wealth. We have put off a repeat of the great depression by using credit expansion (government and private) to allow continued consumption despite increasingly concentrated wealth distribution.
You say that the Fed should follow its mandate to ensure full employment and price stability by controlling credit expansion via setting interest rates. I just don't think that the Fed can do that with that tool anymore if it ever could. To me it seems that the only effective way is to use the tax and spending system to set a wealth distribution that gives full employment and price stability. I'm all for a small government and I'm all for the full employment and price stability mandate- it is just that the only way I can see to acheive that mandate is by setting wealth distribution. From what I can see, setting interest rates or base money supply does not address what needs to be addressed. If it ever looked as though monetary policy worked it was simply because asset bubbles sucked wealth out of the developing world- propping us up whilst impoverishing those countries (though making third world dictators personally very rich).

[moda0306]

I certainly can't disagree that wealth distribution is a huge piece of the problem.  I tend to think, though, that even if we did have adequately even wealth distribution, you'd still need some management of the money supply.

I really like your idea of a citizens dividend, as I think it represents the reality that there is a lot of wealth that ends up in the hands of the few at the top, but really belongs to everyone (our natural resources, for one).

I need to give my brain a rest on this issue.

[stone]

There's an interesting bit today in:

http://jessescrossroadscafe.blogspot.co ... risis.html

"Here is a summation of the Five Major Causes of our financial crisis. As Joe so correctly observes:
Reagan's nomination of Alan Greenspan to replace Paul Volcker as Fed Chairman
The Repeal of Glass-Steagall and the Cult of Self-Regulation
Bush Tax Cuts for Upper Income Individuals, Corporations, and Speculation
Failure to Address Rampant Accounting Fraud Driven by Excessive and Flawed Compensation Models
Providing Enormous Bailouts to the Banks without Engaging Systemic Reform for the Underlying Causes of the Failure"

[moda0306]

I think some of the subsidization of home loans has to be given credit.  I think it was more wall street tomfoolery than gov't intervention, but it can't benied that gov't made it very cozy for a housing bubble to take place.