The correct thing to do is to force them to take their losses, making the shareholders and bondholders eat it. Kick out the management, cut the banks up into smaller entities then refloat. It is cheaper, avoids moral hazard and leaves you with banks which are actually solvent and can lend.
The lengths to which we will go to avoid doing the right, smart, obvious thing are astonishing.
David Kowalski
100% correct. The opposite policy of having shaky big banks take over failed big banks has left the country in a permanent economic malaise without producing strong banks. Each bail out, no matter what it is called, leaves larger entities preying on both our economy and our people.
par4
We the People have no say in the governance of the Republic. It would not matter if 99% of the population wanted something, if it was against the wishes of Rockefeller and his ilk it would not be accomplished. 130 million voters insist on electing Rs and Ds that is the problem.
Bill H
Ala 1980’s Savings & Loans debacle. Not to mention sending malefactors to prison.
Notorious P.A.T.
“We the People have no say in the governance of the Republic.”
Well, people can get something they want if they raise a ruckus. Protestors postponed the Keystone XL pipeline. And the gay and lesbian lobby got a few concessions from a president who clearly dislikes them by making trouble. So it’s not hopeless. Unfortunately, the working class keeps working against itself by voting for people who are against their interests, like Obama, so that pushes against it.
CMike
Alternatively:
Paul Mason: ….[18:18] You’re listening to analysis with me, Paul Mason, at the London School of Economics interviewing the economist Professor Steve Keen. Now Steve, what should we do to get ourselves out of this mess? What would you do?
Steve Keen: [18:32] What I would do is what I call a Modern Debt Jubilee, and that is we have to reduce the level of debt and reduce the wealth of the financial sector without penalizing people who’ve purchased the goods that the financial sector’s spun off to them, that they called “assets” or the loans that they’ve “securitized.” So, what I’ve argued in favor of is what could be called Quantitative Easing for the public. So, rather then Ben Bernanke giving the money to the banks and saying, “Please lend,” you give the money to the public and say, “If you are in debt you must pay your debt down [with this money], if you’re not in debt here’s cash [which you get to use however you want].”
[19:09] What this would mean is that the banks would then find themselves getting a lot of their loans paid off, their cash reserves would rise, their income earning components would fall so that they might be illiquid rather than insolvent, so there would be challenges there. People who had debt would have less debt, they could spend more easily. People who had no debt, [and who] would otherwise be penalized, would have a stack of cash out of which they could spend. The income capacity of the bonds [those who had been debt free had] bought would fall drastically [and] they would have less income to spend out of [that source of income] but they would have much more cash.
[19:35] That would minimize the damage of making the transition and it would reduce the power of the finance sector overnight. Now that would also cause a lot of financial sector people to be unemployed. Tough.
[Laughter and applause from among those in the BBC studio audience]
Greg L
>>>What I would do is what I call a Modern Debt Jubilee, and that is we have to reduce the level of debt and reduce the wealth of the financial sector without penalizing people who’ve purchased the goods that the financial sector’s spun off to them, that they called “assets” or the loans that they’ve “securitized.” So, what I’ve argued in favor of is what could be called Quantitative Easing for the public. So, rather then Ben Bernanke giving the money to the banks and saying, “Please lend,” you give the money to the public and say, “If you are in debt you must pay your debt down [with this money], if you’re not in debt here’s cash [which you get to use however you want].”<<<<
The reason that this will never be considered is that it goes against the financial oligarch's agenda of effectively controlling the world. They wish to use debt as a sort of hammer to extract real assets from the people. Giving people breathing room goes against that whole idea. Admittedly, this just a feeling I have backed up with little, but in many ways I feel that this debt crisis was manufactured as part of that very agenda. People discount conspiracies on the basis that folks can't keep secrets and perhaps that's true of some, but for the .1%, I'd think that be easy. Their agenda is masked by shaping behavior and positioning events and people to further it.
Lisa Simeone
Well, not quite. The Keystone XL pipeline will go through. Obama just held off on it long enough to get re-elected, cause he knew that Bill McKibben, et. al. would just be so happy if he pretended to nix it. They’ll vote for him again, and tell themselves that he really gives a shit.
Strangely Enough
Smaller, better run banks simply lack the resources to bribe politicians- before, during, and especially after their time in office.
Rob Grigjanis
The correct thing to do is to force them to take their losses, making the shareholders and bondholders eat it.
Until this happens, we should refer to them by their proper name; casinos. Or, at the very least, “banks”.
Linda
Not only does Harper gives millions to banks, but, to mines, oil and gas corporations and big business as well. Harper also gives them, huge tax reductions. He thieves from the peoples tax dollars, to give to the wealthiest corporations in the world.
They we have, Harper and his minister’s outrageous expense accounts. Harper did not need, a $1 billion dollar, stupid fake lake.
Harper has just made it easier to shop in the U.S. Canada loses billions in revenue. Harper refuses to say why, Canadians can save up to 75%, by shopping across the border? We pay more for our own goods, than other country’s do. It doesn’t matter the price of oil, Canadians are forced to pay obscene gasoline prices.
Harper has made a deadly financial mess out of Canada. To have a one economy driven country, is insane.
Notorious P.A.T.
“People discount conspiracies”
I don’t know if anyone made this crisis happen, but the financial elites sure are doing like you say and using it to their advantage.
“Obama just held off on it long enough to get re-elected”
Yup, I know. That’s why I wrote “postponed” and not “cancelled”.
alyosha
Frightening infographic on the amount of exposure each too-big-to-fail bank has in derivatives, and how this dwarfs the size of governments, or collectively, the entire global economy.
I’m not sure how practical “Stop Bailing out the Banks” is, given the existence of these “financial weapons of mass destruction” (as Warren Buffet called them) . It’s interesting to me, that Bank of America, one of the larger holders of derivatives, got special treatment, placing its particular risk on the backs of taxpayers.
Obviously, in a capitalist system, the losers should be allowed to fail, and get flushed out of the system; but I doubt if anyone fully knows or is ready to accept the consequences of letting these big banks fail, with so much financial dynamite on their books.
Obviously, the powers that be are playing for time, hoping the economy will turn around and get these banks out of trouble. I’m no banking expert, and so I don’t know if the issue is 1) because of derivatives, a bank failure at this level would be a system-wide catastrophe, or 2) a failure is manageable but there simply is no will to do the right thing – the banks are too well connected politically. I suspect both, but especially the former.
Notorious P.A.T.
We don’t have to let failed banks vanish into the dustbin of history. Rather, the FDIC should immediately take them over, fire the people responsible for wrecking them, break them up into smaller entities and get them back to work again. That’s what the FDIC is for.
Petro
The First Bank Has Been Criminally Indicted for Mortgage Fraud
Yes, it’s a little fish – but as the post points out, it does serve as a proof-of-concept and weakens the arguments against bank prosecutions in general.
No, it doesn’t inspire much hope on my part.
Morocco Bama
Protestors postponed the Keystone XL pipeline.
There is no way in hell it was postponed because of protest. That is patently naive.
groo
Now what is a bank?
The holder of deposits and lender of credit en par?
This was not even true 300 years ago.
In an ideal case the ‘bank’ is/was an arbitrageur between a holder of temporary surplus and a creditor of temporary deficit, plus a risk premium.
Never true.
Pious lie.
No. Not pious. The pepper-sacks already were notorious cheaters.
Because of what?
Abstraction!
It is much easier to cheat on abstractions than real substance.
Simple as that.
All trade by intermediaries is based on that simple fact.
Do not want to bore you.
( I know my Michael Hudson, so do’nt bore me with trivialities. )
Derivatives nowadays amount to the 250s trillions and are held 95.9% by FIVE banks:
JPM, CITI, BOA, GS, HSBC
…
Specifically, of the $250 trillion …
a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure.
…
http://www.zerohedge.com/news/five-banks-account-96-250-trillion-outstanding-derivative-exposure-morgan-stanley-sitting-fx-de
Now what does that mean?
Nowbody seems to notice:
LOGICALLY those derivatives are owed WITHIN the Club!
Now what dies that mean?
Some 10 trillion are OUTSIDE the club. Unsuspecting idiots, right.
Everything else is hot air.
This meager 10 trillion is the POTENTIAL substance, approximately 1/5th world GDP, which is large enough, actually TOO large.
One tenth world GDP actually AT MOST is at our disposal at any time, probably much less, because of the shrinking pie o world consumption.
Everything else, well, is incest, i.e. -ahem- ‘owners’ ‘owing’ to THEMSELVES.
World heritage is around 200 trillion total. not more. Not less.
As a monetary equivalent this is 1/5th world heritage!
Digest this mindboggling fact on your peril, as your doctor says.
groo
…World heritage is around 200 trillion total….
Actually I have been meditating about that for some years, and found out, unsurprisingly, that this number is just that: a number.
Maybe appealing to numbers guys.
Actually the world, above a certain limit of basic needs, is innumerable.
Just like a piece of art, which is arbitrarely valued, the world, environment, whatever, cannot be valued.
Which poses an unsurmountable hurdle for all those beancounters out there.
But because they are just that: beancounters, they cannot recognize items larger than a bean.
Amen
StewartM
Notorious P. A. T.
Why not instead resurrect the Bank of the United States?
(My own vision of responsible banking would be credit unions and the US Bank, the latter making a *small* profit which gets paid into Treasury. It’s all part of what needs to be done—re-creating an economy where people get rewarded for going out and creating and improving goods and services rather than the current “paper economy” where the quickest way to riches is to manipulate money and transfer ownership. You do that by reducing the profit which can be made out of finance).
StewartM
groo
StewartM
…
Why not instead resurrect the Bank of the United States?
…
Because You then touch the holy grail, which is ‘interest’.
Everything monetized carries interest, which in total is 40-60% of ALL monetary transactions. (this is why ALL transactions need to be monetized, because then interest can bve extracted !)
EVERY property whatever carries interest in the capitalist system.
(that ‘interest’ is associated with ‘risk’, and therefore justified, is a selfserving myth to the myth.)
You can estimate this to approx 5% of ALL property on average, which adds up to 50%, and indirectly compounds to this staggering sum.
The rest being the state, -not carrying interest- which is about 20-30% , and the remains being ‘Your’ generation of -ahem- ‘value’, or whatever you term it.
If You touch this ‘secret’ and are in the business of money creation, eg banking, or retail in the business of secondary money-creation, you are fired the next day.
You can see this by adding up land value, daily needs, energy, wars, etc.
Or put it the other way round:
If You own, say ONE million of whatever, you can basically freeride on the rest of society.
If You own FIVE million, You can affort a decent live with a couple of wage-slaves, who engage in the interest treadmill, supporting yor lifestyle.
If You own FIFTY million, you can affort a decent professor of economics or whatever to argue in Your favour.
This is the perpetuum mobile.
Then guess where we, as a society, are.
groo
Henry George touched the issue of ‘land value’, which is THE main issue of justice.
Americans do not like that idea, because they basically stole the land from the americcan Indians, and transformed it to ‘property’.
They then stole the land from the mexicans in Califorina and Texas,who again stole it from somebody else.
Now the American Indians had NO conception of land property.
It was European feudal thinking, which secretely infiltrated the new continent, and transformed virgin land into interest-carrying land-value and raw-materials value, ie farmland, oil-wells, gold-mines.
How did this come about?
What is the role of property-law?
How can this be justified?
Questions, questions, questions.
Here we are: Might makes right.
Despicable as it is, but here we are.
To establish some indian reservations is just putting lipstick onto the pig, which is brutal theft.
‘Money’ is just an abstraction, to transform the lipsticked pig into Mona Lisa.
Shut up and get used to it!
Petro
There you are, groo. And there, you’ve said it. With uncompromising clarity.
Petro
groo – I’ve been unforgivably neglecting my blog of late – can I copy these comments for a “guest” post, with attribution? You can give a more detailed response (and a name or alternate handle for attribution) to me here: mjpetro.smtp (at) gmail.com…
Petro
(And Ian – you know I will of course provide a proper link to your blog if groo approves this.)
Morocco Bama
Shut up and get used to it!
Or better yet, accept it and revel in it. If you do, you’ll be much happier.
groo
Petro,
You’re welcome.
I do not claim ‘property’ on what I say.
The situation we’re in, is our common fate.
Just correct the spelling, please. 😉
Petro
Here it is.
Notorious P.A.T.
“There is no way in hell it was postponed because of protest. ”
What did it, then?
beowulf
“Why not instead resurrect the Bank of the United States?”
Remember, Andrew Jackson waged jihad on the Bank of the United States because it was privately owned. The Postal Savings System would be a better resurrection.
http://en.wikipedia.org/wiki/United_States_Postal_Savings_System
Morocco Bama
What did it, then?
Maybe this has something to do with it:
http://www.zerohedge.com/sites/default/files/images/user12162/imageroot/2012/01/warren%20puppet.jpg
You could replace Buffet in that pic with any number of things/people, Soros included, but certainly not the Environmentalists.
There’s that…..and, of course, what Lisa has mentioned. Not only that, when’s the last time Obama caved to any kind of protest> He’s certainly not going to now for genuine reasons, although I believe he would use it as his cover story.
Alcuin
@groo: – Did you read this? I particularly liked the last paragraph – Roberts seconds your statement about who owes what to whom.
Morocco Bama
That was an excellent analysis by Roberts, Alcuin. Thanks for linking to it.
The hole keeps getting deeper and deeper. How deep can it go?
Petro
I agree as well about the Counterpunch link. A sobering read.
beowulf
Paul Craig Roberts is a little over the top about the risk our public debt poses (since we own the printing press, if China or anyone else tries to crash the bond market, the Fed can buy up every T-bond as fast as they sell them, what’s more it can peg long-term interest rates if it chooses (during WWII long bonds were capped at 2.5% even as we were running budget deficits between 20% and 30% of GDP year after year). Our bigger problem (and one that Roberts has written about frequently) is the rade deficit. We’re hollowing out our manufacturing base and the benefits are accruing to Wall Street instead of the real economy. Even with “retraining”, virtually none of the laid-off workers will ever find a job that pays as well.
Roberts’s idea of just tearing up the derivative contracts is fairly awesome, and he’s right it can be justified as a national security action. The International Emergency Economic Powers Act is cartoonishly broad in the powers it gives the president. It happens to be included in the “War and National Defense” title of the USC Code.
“the President may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise… investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States…” 50 USC 1702
http://www.law.cornell.edu/uscode/text/50/1702
John Puma
The delay in the approval of the XL Pipeline was caused by objections at the level of the Nebraska legislature about the proposed route through the ecologically sensitive Sand Hills region.
http://tinyurl.com/73r358v
Later Obama appeared in Oklahoma to cheer on the construction of the southern half of the pipeline, from Cushing, OK, to south Texas refineries.
http://tinyurl.com/cpn7h5d
On May 4 the Dept of State announced that it had “received a new application from TransCanada Corp. for a proposed pipeline that would run from the Canadian border to connect to an existing pipeline in Steele City, Nebraska. The new application includes proposed new routes through the state of Nebraska. The Department is committed to conducting a rigorous, transparent and thorough review.”
http://www.keystonepipeline-xl.state.gov/
Morocco Bama
What’s ironic about the Keystone is that the pipeline itself is the least of the environmental worries, and the wrong place to focus concern. What’s more egregious is the extraction process itself in Canada and the refining process in Texas. Last time I checked, refining is a pretty nasty business……and it receives little attention with the general public. I also understand that the refining process for tar sands oil is a bit more intensive, and thus it has a greater environmental impact. So, the whole Keystone issue is misdirecting, imo. The tar sands should never have been allowed to be developed and if the “Left” in Canada can’t prevent that, and it hasn’t prevented it, they may as well call themselves what they really are…..FECKLESS….like the so-called “Left” in the U.S.
groo
Alcuin,
yes, I did.
Not thoroughly, I must confess, but over the years it gets redundant, boring, infuriating, depending on my mood.
The trick with interest is, that it is not only exponential over time, but stacked as interest over interest.
Some low-level bank employee (a software guy )over here once analyzed this situation and came to the conclusion that everybody works some 70% of the total for the payment of interest.
He concluded, that a 15hr week would be enough, if we just could get rid of this recursive pile of interest.
The published this in the net as a lengthy essay in the early 2000’s.
His Banker superiors got wind of that and urged him to revoke.
He did’nt, because he insisted on the logic.
Then he got fired.
Quite logical, if one considers the eventual embarrassment of the big clients, who exclusive live on interest, and band together like jackals.
Jobs were a bit more secure then. He went to the court and at least got a compensation.
Nowadays it is not so easy any more.
The risk tends to be existential.
Quite a lot of honest old men in their high seventies (Hudson, Roberts, Nader etc) speak out, and are aware of the risks of the young.
groo
There is another story, which hopefully is of interest:
TV, over here, after midnight:
Ukrainian oligarchs and the European soccer-championship.
(I number this for the sake of clarity)
1) ALL Ukrainian soccer teams in the premier league are owned/massively sponsored by oligarchs.
2) The oligarchs are all billionaires (from ‘unknown wealth’ to approx 20billion)
3) Every one of them spends from 100 million to 1 billion on ‘their’ team.
4) The origin of their wealth is hidden, but definitely starts in the early 1990s,. after the fall of the iron wall.
5) Everyone of them has
5.1)a background in the upper echelons of the communist party around 1990, or
5.2) was a top-manager of state-enterprises (coal, steel etc), or
5.3) came from the criminal underworld milieu,
or an unknown combination of the three.
Most of them are highly sportive and muscular characters, going to the gym every second day, driving bomb-hardened dark-glass limousines, not your typical Warren Buffet old man ‘wise’-guy type.
Jackal versus fox.
The reason why they all seem to engage in soccer, is an ingroup competition between Slavic and Mideast tycoons, which found its way into western (British) soccer like Abramov/Chelsea and others.
Now why do I tell this?
This shows in archetypal clarity one of the more primitive ritual status combats amongst the moneyed elite.
Another one being eg ‘art’, where paying 100 million for a painting is strangely detouched from the needs of the plebs, and serves relative status ambitions within this ingroup.
On the other hand, a core issue is to firmly establish a belief-system wrt the lower strata, who support this madness by fearful admiration, which this ‘Elite’ does not get easily from their peers.
The Ukrainian oligarch sells the tickets for the games to HIS coal miners, who work for HIM, who are very suspicious, but dare not speak out.
Which is an interesting speculation from the oligarchs side:
They give away the ‘circus’ basically for free, just to make the plebs pay back in what ever ‘currency’ they choose, and may it be their lifes.
This high stakes gambling aspect goes through the whole oligarchic elite and, I am afraid, infects their political servants (under the disguise of ‘caution’ and ‘protection’ on behalf of their respective societies) –Bush, Blair, Obama, Merkel, Putin, Saddam, Gaddafi. I cannot see much of a difference. Sorry.
You are great, but be afraid, or cautious!
Maybe a projection of the higher strata onto the miserable lot, who complement each other.
The ‘jackals’ are not always a coherent lot, as many suspect, only sometimes.
I am surprised, that the good George Lakoff does not widen up his concept of ‘conservative memes’, which is basically about authortitarianism, property, strict father, ‘god’ and such, but should also be about individualism, fear of catastrophy (sin?), divide and conquer (heaven/hell?), which are not exclusively conservative memes.
On the other hand those blend well with evangelical/Calvinist convictions, which bring additional ‘order’ into the state of elite/plebs affairs.
Sorry, if this looks like a distraction, which it hopefully is’nt.
Formerly T-Bear
An interactive look at debt in the European Monetary Union and the austerity measures being used was published by Al Jazeera:
http://www.aljazeera.com/indepth/interactive/2012/06/20126127221845926.html
with notes as to the differing damages austerity is doing to these economies. The economy first in line to undo the euro zone – Spain, has a national debt of about 2/3 of its GDP (far less than Germany or France even now) and is being torn asunder by the market wolves in a feeding frenzy. Notice how fast 100 billion €uros ($125 billions US) disappeared, two days, there is apparently no government minister responsible or accountable, they all need be put out on the street or up against a wall for their misfeasance and/or intentional economic ignorance.
Not one government leader has suggested an open season on these wolves by using their taxing guns and regulatory traps, nor have they seen fit to fence off access to their debt bonds in such a manner that the market tail will not wag the economy dog (restructure the central banks (ECB and NationalCBs) as the only source of bonds available for fund safekeeping through the national regulated banks only), if they are to be sold prior to the expiration period, the market can provide a secondary outlet. The governments need regain control of their finances and not leave that control to predatory speculators; that is what governments do and what they are for.
Celsius 233
Formerly T-Bear PERMALINK
June 13, 2012
Not one government leader has suggested an open season on these wolves by using their taxing guns and regulatory traps, nor have they seen fit to fence off access to their debt bonds in such a manner that the market tail will not wag the economy dog (restructure the central banks (ECB and NationalCBs) as the only source of bonds available for fund safekeeping through the national regulated banks only), if they are to be sold prior to the expiration period, the market can provide a secondary outlet. The governments need regain control of their finances and not leave that control to predatory speculators; that is what governments do and what they are for.
~~~~~~~~~~~~~~~~~~~~~~~~
Yes, that’s a curious stance.
I think it also speaks to our own failures to fully understand our governments, their limits, and most importantly our own responsibility.
I shouldn’t be surprised to learn most citizens are sitting and wringing their hands, impotently crying what’s to become of us?
That has always been in their own hands; if, but, they could show a bit of courage.
Formerly T-Bear
@ 233ºC
The stance more curiouser is the political opposition’s silence, the dog that isn’t or doesn’t bark. Nary a word, not a peep out of them. It would seem reasonable to hear questions being asked – nope, just silence. The first question: Has the austerity being demanded upon public resources been used before? Where? When? What was the result? for the country? for the economy? for the public? for the nation’s wealth? Where the national resources lost?
When no answer is forthcoming then the question: What is your (the leader’s) knowledge of economics, if any? What is your competency to hold public office? Is your ignorance the result of incapacity? or is your ignorance willful? Which way do you wish to now vacate your office? the easy way? or the hard way? And then put the person on either the street or up against a wall (the permanent solution) depending upon the circumstances.
The population carries blame only so far as they take no action to educate themselves; education doesn’t stop after elementary school, displaced by a social, hormone enhanced party throughout Jr. and Sr. High schools. Education ought continue throughout life and does in those taking responsibility for themselves, all others fall by the wayside, the detritus of cultural failure. For either a republic or a democracy to succeed and maintain success, the education and training of those citizens cannot be any less than that of a successful monarch. This has not been done and the republic is de facto gone, only a delusion remains, and what was cannot be put back together, but if there is an understanding of the social dynamics, then something else can be constructed in its place. Until then, the psychopaths have won, only systemic collapse has the ability to remove them. If you know what you are about, then it’s likely you’ll see the other side, the failures have only to see ahead as far as the light just past the bend in the tunnel.
groo
T-Bear,
after looking for years now at ‘debt’ from different POV’s, I still find it extremely difficult.
ONE method would be to break it up into domestic components, like in
http://en.wikipedia.org/wiki/File:Components-of-total-US-debt.jpg
for the US.
ANOTHER would be to break it up into domestic and foreign.
In this case eg Italy and Japan hold their debts in the country.
A THIRD would be to include/exclude future obligations, eg pensions.
Numbers differ grossly, even if one chooses one approach.
Why?
a) transnational movement of money cannot be tracked.
(tax heavens, dark pools, nonreporting financial entities to BIS and IMF are approx 50% of total)
b) accounting rules are different across countries
Now, if one steps back, one sees that -at least GLOBALLY and in theory- debts and assets have to be equal over LONG time and LARGE space, right?
But they are’nt for the short-sighted, by a big margin, I suspect!
Because
i) somebody borrowed from the future (monetized expectations)
ii) risk has been monetized (eg Spain pays 7% interest, Germany 1% on some government obligation/bond )
iii) other intangibles like ‘life’ via insurance, or ‘art’, via arbitrary assignments, to mention a quite disparate couple of categorials.
The one being probabilistic, the other aesthetic, in this case.
This creates a fundamental confusion regarding what is what, wrt the categorials!
—Break—
groo
—sequel—
Obviously we, as a ‘species’ of capitalist book-keepers, are unable to do this sort of accounting across categorical borders.
Possibly nobody does.
If one has on the one hand the ‘basic needs’, food, etc, and a piece of art valued at 100million on the other, one feels that there is some grotesque mismatch.
Destruction (eg Katrina, wars) adding to GDP? Perverse!
I’m afraid, -as we probably all are here- that a system of valuations, which nobody understands anymore, and is exploited by cynics, as long as it exists, is doomed, and falls back to the essentials, which will be the socalled ‘basic needs’.
Paintings burned to warm one’s feet, as in the middle ages.
Later generations, if there are any, who worked up their way from the essentials, will bemoan the loss, and hopefully point the finger at those responsible.
Celsius 233
Formerly T-Bear
June 15, 2012
@ 233ºC
…For either a republic or a democracy to succeed and maintain success, the education and training of those citizens cannot be any less than that of a successful monarch. This has not been done and the republic is de facto gone, only a delusion remains, and what was cannot be put back together, but if there is an understanding of the social dynamics, then something else can be constructed in its place. Until then, the psychopaths have won, only systemic collapse has the ability to remove them. If you know what you are about, then it’s likely you’ll see the other side, the failures have only to see ahead as far as the light just past the bend in the tunnel.
~~~~~~~~~~~~~~~~~~~
Your last paragraph speaks volumes to the failure and solution; which is not forthcoming.
This continued morphing is heading only in the direction of fascism (I feel we’re already there).
A systemic failure is the only way for change, IMO. Without that; the morphing will continue and be refined and will be called real change. The delusion/illusion will carry on…
groo
Celsius 233,
…
A systemic failure is the only way for change, IMO. Without that; the morphing will continue
…
I am afraid you are correct.
The Greek Syriza party has been a hope, but will face a significant defeat tomorrow June17.
Ironically the Syriza program has been termed ‘extremist left’, which upon closer look is completely rational.
Eg see here:
http://www.transform-network.net/en/home/article/10-programmatic-commitments-of-syriza.html
Is this ‘far-out-extremist left’ ?
No.
But:
Finally the greek people will bow down to fear-mongering, which must not be such a bad thing.
To watch the system crash by its own design is better than to have some opposing party involved in compromising, to put the blame to.
So I am completely on Your side.
Quite possibly a win of the so-called moderates will delay the crash for another two years, and puts the EU en par with the US, China and the oil conglomerate, which are bound to crash simultaneously, because of their interlink.
After-the-crash-forensics will be futile, because the aim of identifying causal chains will lead to infinite regress, thus to nothing.
So it is unclear that we even learn from such an epochal event, at least if we apply the wrong diagnostic tools.
It is the system, stupid.
Celsius 233
groo
June 16, 2012
@ Celsius 233
…After-the-crash-forensics will be futile, because the aim of identifying causal chains will lead to infinite regress, thus to nothing.
So it is unclear that we even learn from such an epochal event, at least if we apply the wrong diagnostic tools.
It is the system, stupid…
~~~~~~~~~~~~~~~~~~~
Yes, which goes back to the question; what’s the point of the system? That identified at least points a way forward to the inevitable; the system must crash, or there will be no change.
Morocco Bama
Here’s an excellent segment from the Keiser Report. This is so ridiculously brazen and transparent. It’s a rip-off of the highest order in plain view, for all to see, but as FTB has mentioned, the majority, due to lack of a suitable education, lack the critical intellectual capacity to comprehend the score, or the ruse. The EU Nation-States are being used by the Plutocracy as Laundering mechanisms through the German state and the Troika. Some of the terminology from this report is acutely appropriate. Ponzi Austerity Scheme. Workhouses. The Short Count Con.
http://www.youtube.com/watch?v=Qk4Y0U-bQmA&feature=player_embedded
Yanis Varoufakis makes a great point. The Plutocracy, operating through the Troika, is attempting to install a form of Neofeudalism and turn the majority of Europe into a massive Workhouse. Remember how Rove said he so loved the Gilded Age, he wished for its return? Well, we’re well on our way…..approaching it from the opposite direction this time. Who will be the next Charles Dickens?
http://en.wikipedia.org/wiki/Workhouse
groo
Celsius,
…what’s the point of the system? …
well, that’s the difficult one.
I do not want to weasel out:
1) there seem to be several human character-types, who form their separate belief systems, and, in heterogeneous societies are in conflict with each other.
2) at least one type defines itself by ‘surface’, or ‘appearance’, as is said from sociopaths. This has an addictive quality, in that can infect a significant proportion of indifferent fellows.
3) another aspect is double-entry bookkeeping, dating back to early capitalism of the 1300’s.
http://en.wikipedia.org/wiki/Double-entry_bookkeeping_system
This may sound harmless, but is the foundation of comparing incomparables.
4) others: Property, interest, debt/guilt, power.
5) the early hijacking of this system of relationships by subtypes of(1).
6) …
To me, Michael Hudson (as economic historian), Bill Black (as criminologist), Jerry Graeber (anthropologist) did a good job in enlightening me wrt the fundamentals.
A lot of issues in economics are pure propaganda, eg Hardin’s ‘tragedy of the commons’, not to mention the ‘invisible hand’, ‘market equilibrium’ or the ‘Laffer-curve’.
The reactionaries are quite inventive in promoting this and other nonsense, and leave the difficult task of DISproof to the intellectuals of the left, who seem to be happy to have another nut to crack, although it is obvious to any sane person, that this is an empty nut, and a lot of physical and intellectual energy is wasted.
The money-system, as it is, is not working.
At ‘best’ it works for crooks.
Full stop!
Let the other side prove the contrary!
groo
to elaborate on (3), double entry book-keeping:
This, at first sight, seems to be a work of genius, long before the invention of the printing press.
Was it?
In English it is called ‘bill of exchange’ (‘Wechsel’), and was based on mutual trust in transnational far-trade, guaranteed by intermediaries. A lot of those were jewish traders, because they were multilingual and had a common belief-system based on the Torah and the Talmud, which guarateed a certain ethics, long before Max Weber’s protestant ethics.
Now this system was corrupted quite early by eg mixing pepper with similar-colored sand, and was heavily sanctioned, up to the death-penalty.
Money trumps ethics, in case of conflict. Ethics needs a little enforcing sanction, at least for a certain kind of people.
The more important aspect is comparing incomparables, which, in ordinary logic is forbidden: Apples and oranges.
Money, as the universal intermediary, seemingly healed this flaw.
Because of this money-function, apples became comparable to oranges.
An epic story develops from that, which I spare you.
i) A = -B , where A= apples, B= oranges , a forbidden equation, at least for physicists !
Then you introduce money:
ii) X(A)= -X(B) , where X= ‘money’ is a function, where the function is evaluated by a human intermediary, which is the trader! THINK ABOUT THAT!
The trader relates to the producer like X to A or B.
X is an ‘abstractor’, so to say.
Now this seems to work, in a mathematical sense, which it is NOT!
Why?
in a book-keeping sense, (ii) seems to work, but if we further elaborate on the equal sign, then
X(A) =(abstractor)= -X(B)
where the human ‘abstractor’ is a function of time and customer-preferences, ie the ‘value’ of pepper is not invariant.
This is the fundamental flaw of double entry-book-keeping as a time-invariant equation.
We do not even have to take the additional problem of risk/interest into account up to now, which is a sensible issue in itself, and historically depended on weather and possible catastrophes like earthquakes or war, and basically is a bet on the future.
(NB: ‘War’ can be provoked if necessary, ie this type of ‘future’ can be influenced by the sufficiently powerful. )
Nassim Taleb’s dear friend, the black swan, has been known for aeons, and has been cancelled out by its complement, the jubilee, which is a function of the effects of compounding interest (deterministic) plus the effects of catastrophies (random).
The joker, as said, being human induced catastrophe = war.
The peaceniks of this world should be aware that they remove a fundamental option from the table, if they oppose war.
Saint Clausewitz said: ‘war is the continuation of politics by other means’.
Replace ‘politics’ by ‘economics’, and it sounds about right.
Confusing?
Hopefully not.
groo
note:
I transformed ‘X’, as a functional, to ‘=(abstractor)=’
so this should read:
X(A)=-X(B) –> A =(abstractor)= -B
The minus-sign signifies that the sum total =0:
A+(-B) =0;
Feel free to vary that:
eg
X(A) +(-Y(B)) = 0
which should mean that there are two DIFFERENT evaluators X, Y, who value the goods differently.
Introducing the ‘abstractor’ as a replacement for the equal sign, complicates the issue, which is about valuation.
A refinement would read like
(X(t),A) =abstractor(t)= (Y(t),B),
Which means that all terms are time-dependent, and the equation is not an equation.
No surprise.
All transcriptions of human transactions into mathematical terms should be treated with utter suspicion.
Double entry book-keeping tried that, and utterly failed.
Apologies to any non-mathe/-logically inclined.
It is just easier for those inclined ones, to better understand the issue.
Amen.
Celsius 233
This is brilliant; a former Harvard professor of Obama’s says Obama must be defeated;
http://www.huffingtonpost.com/2012/06/16/roberto-unger-obama_n_1602812.html
This guy/professor Unger is about as succinct as it gets.
I think it fits here, I hope, sorry if not…
Morocco Bama
Groo, I agree with your sentiments concerning the double-entry system of accounting…..and I’m a former CPA. It’s a half decent mechanism for items that are largely physical/tangible, but beyond that, it becomes increasingly useless, and inappropriate. It is emblematic of the Western Mindset where all things under the sun, and above the sun, must be categorized, quantified and qualified…or in other words, made to fit a limited image.
I may have mentioned this before, but since the advent of the double-entry system, transactions have become exponentially more complex, and the double-entry system in the face of this, is an utter farce. Not only is the system itself ridiculously inadequate in capturing the complexity, but those who administer it increasingly do so either incompetently, or fraudulently. Often it’s the latter disguised as the former. One such facet of the double-entry system that is ripe for shenanigans of all sorts is the accrual process. Everywhere I have been in my career, without exception, there has been an flagrant abuse of the accrual process….and it’s precisely because it’s the one facet of the double-entry system that allows for some subjective creativity…..and incentivized wolves can be quite creative when it comes to counting sheep.
The double-entry system at this point is a farcical veneer meant to lend legitimacy to a rotten to the core economic system. Some know it, and pretend otherwise, and others worship it as though it were Yahweh. Either way, it’s lipstick on this squealing pig.
Petro
I find the discussion on double-entry bookkeeping very interesting and enlightening. Excellent points made. Thank you.
Petro
Celsius – Unger makes some (sadly) valid points. Thanks for the link – shared.
Morocco Bama
Economics 101 right here:
http://www.youtube.com/watch?v=LiNhNArP3PA&feature=player_embedded
groo
Celsius,
…This is brilliant; a former Harvard professor of Obama’s …
Yep.
I downloaded this yesterday for offline-viewing.
I made its rounds over at Naked Capitalism also. A bunch of quite grim people there nowadays.
Yves does an admirable job to bundle the dissident firepower
This Unger-video is as harsh as it can get.
One always wonders how Obama can swallow this from one of his former peers.
Plus his mistress Michelle.
Are they full-grown-sociopaths, just accidentially happening to be of brownish color?
In the age of equality wrt color, well, there obviously are.
Is Obama an evil genius, even deceiving the Nobel committee and a lot of good-intentioned people, who elected him?
Quite possibly.
If so,
what about the filtering process of his puppeters?
Or are there none?
Is he a genius of his own making?
Quite improbable. talent + selection +training + financing + intention (to win whatever) is in current politics the same as in sports.
—————————
Another top which recently surfaced:
“Testimony of Marriner Eccles to the Committee on the Investigation of Economic Problems in 1933”
http://londonbanker.blogspot.de/2011/09/testimony-of-marriner-eccles-to.html
http://en.wikipedia.org/wiki/Marriner_Stoddard_Eccles
An -ahem- Mormon Republican.
Anyway. He analyzed the economic situation of 80 years ago to a astonishing precision.
Before Keynes!
No Krugman needed
Once upon a time there must have been ones with sort of a brain and an insight into societal processes.
Why do we not learn?
Another one is Wladimir S. Woytinsky, a Russian working for the German Federation of Trade Unions for some 12 years, who was equally prescient, but finally lost the case, to his fellow unionists, who preferred to align with hitler.
Some meager english reference:
http://en.wikipedia.org/wiki/Vladimir_Woytinsky
History rhyming?
Well.
Faintly in the background maybe.
The loud voices of unreason in the foreground at least are terribly dissonant, and one has a hard time tuning them out.
Reminds me on my youth, where one actually had to tune the frequencies, and not push a digital button, where the radio locks into the desired program without thinking or skill, and locks out the undesired ones with -ahem- ‘precision’.
Use the metaphor at your own risk.
groo
Morocco Bama,
good to see that you got the same impression.
Actually the rules are quite simple, as I experienced from some 20yrs of co-running a business:
Hire a testifying company with high reputation, such that the financial state authorities think twice to engage in a legal battle. They never did.
The rest is: ‘MASSAGING’ THE BOOKS.
The intricacies of double-entry-book-keeping.
No outright fraud involved in our case.
Just interpreting the rules on a wide margin.
For a small company with <20people this can actually be a matter of survival, and as an owner, who potentially has his head in the sling, you do'nt care about the big picture.
Only after that I became aware, what an intricate system that is on a broader scale, which puts the small survivor into the same category as the commanders of the Titanics of this world, I realized that something is wrong here.
Formerly T-Bear
The Minority Report:
Disagree with Groo and MB re double entry bookkeeping. It appears to be nearly as old as money, over time as sophisticated tool as any devised; likely contemporaneous and equal to the geometry of ancient Egypt to measure land if there is any validity to this:
http://www.levyinstitute.org/pubs/wp_717.pdf (read the whole link for a superior history of money as well)
Double entry as it is legitimately taught is an analytical tool for managing business, nothing more; its abuse enters the realm of control fraud and is the basis of the current economic crisis. Double entry is a resource when understood or can be used to deceive and obscure; like any tool its value depends on the hands which wield it and for what purpose. The use of debit as a synonym for debt is the mistake that fuels the austerity drive that is wrecking the economy, effectively strangling government to death in a drive to remove governmental regulation of control fraud. This is also the drive to starve the educational system so that the future is robbed of the necessary tools with which to conduct their affairs, both private and public. Like the current rage against corporation, a legal tool the history of which dates to the beginnings of Roman law (read: Sir Henry Sumner Maine ANCIENT LAW ISBN 0-88029-101-X). The current ignorance is more likely than not to destroy these tools rather than learn their uses and control their direction for their benefit and betterment. It is their own ignorance that is the public’s enemy, not the elite, not the wealthy, not the educated.
Morocco Bama
FTB, I’ve read many of the accounts about the origins of the current iteration of the double-entry system(s), and yeah, it has some value in helping outside parties make somewhat more objective opinions about the financial state of an organization at a given point in time. However, that very same value is also a hindrance because it shapes how organizations are perceived, and thus formed and arranged. IMO, it helps to keep all of humanity’s immense potential anchored to the status quo because it controls the boundaries of humanity’s perspective. In otherwords, it is a box.
It is their own ignorance that is the public’s enemy
Yes, but why is the public ignorant? That’s at the heart of it, and if there is an enemy, that should be seen as it. The same mechanism that has inculcated this epidemic of ignorance has also inculcated wealth secured by greed and avarice, starvation, war, environmental degradation and so on, and so forth. To me, it boils down to one thing….accumulation. I was watching a show on Chimps the other night, and heretofore assumptions about Chimps are currently being revised in light of new evidence. Previously, it was thought that the major difference that separated Chimps from Humans was Humans’ ability to fashion tools. Well, it has now been determined, beyond doubt, that Chimps make tools as well, and they pass that knowledge down to the succeeding generations, thus they have culture. They ended the show with the unanswered question, what is it then, that makes Humans different from Chimps? I would say it’s accumulation, often called Civilization, and all its implications. The Chimps live for the day, and thrive off of what nature provides. Humans live for tomorrow, and require more than nature provides, and double-entry has aided that endeavor tremendously….perhaps to the peril of all Humans, all Chimps and most living creatures on the planet.