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Why the Economy Is Bad for Most People and Getting Worse

2017 October 4
by Ian Welsh

This is the second collation of articles on why our world is what it is, and how we can change it. Some of these articles are old, as I don’t write as much as I used to about economics because the decision points for avoiding a completely lousy economy are now in the past. The last decision points were passed by when Barack Obama announced his economics team and refused to try and get rid of or bypass Bernanke to enforce decent policy on the Federal Reserve.

(Author’s Note: This was originally published October 6, 2014. I’m putting it back up top, as I have gained many new readers since then.)

However, this economy was decades in the making, and if we do not understand how it happened we will only wind up in a good economy through accident, and, having obtained a good economy, will not be able to keep it. These articles aren’t exhaustive; a better list would include almost five centuries of economic history, at least in summary, and certainly deal with the 19th century and early 20th centuries.

I was heartened that hundreds of people read the articles linked in my compendium on ideology and character so I dare hope that you will, again, read these pieces. If you do, you will walk away vastly better informed than almost anyone you know, including most formal economists, about why the economy is as it is.

The Decline and Fall of Post-War Liberalism

Pundits today natter on and on about income inequality, but the fundamental cause of income inequality is almost always determined by how society distributes power. As power goes, so goes income–and wealth. The last period of broad-based equality was the “Liberal Period,” which started with the Great Depression. You can locate the end of that era at various points from 1968 to 1980, but 1980 was the point where turning back became vastly difficult. This was the moment when a new political order was born: An order conceived to crush those who were willing and able to fight effectively for their share of income and money.

Why Elites Have Pushed “Free Trade”

Those who are middle-aged or beyond remember the relentless march of free trade agreements, the creation of the WTO, and the endless drumbeat of propaganda about how FREE trade was wonderful, inevitable, and going to make us all rich. It didn’t, and it was never intended to. Understanding fully why it only enriched a few requires understanding the circumstances required for free trade to work, the incentives for free trade, and the power dynamics which make free trade perfect for elites who want to become rich (often by destroying the prosperity of their own countries). Free trade is about power, and power is about who gets how much.

The Isolation of Elites and the Madness of the Crowd

All societies change and face new challenges. What matters is how they deal with new circumstances. The US, in specific, and most of the developed world, in general, is in decline because of simple broken feedback loops. Put simply, ordinary people live in a world of propaganda and lies, while the rich and the powerful live in a bubble, isolated from the consequences their decisions have on the majority of the population, or on the future.

The Bailouts Caused the Lousy “Recovery”

This may be the hardest thing to explain to anyone with a connection to power or money: The bailouts are WHY the world has a lousy economy, not why it isn’t even worse. If people cannot understand why this is so, if they cannot understand that other options were, and are, available, other than making the people who destroyed the world economy even richer and more powerful, we will never see a good economy, ever again.


(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)


The Rapid Destruction of Countries

You may have noticed, you probably have noticed, that most countries are becoming basketcases faster and faster. Some are destroyed by war and revolution, others by forced austerity. However it happens, the end of anything resembling a good economy through austerity in places like Greece, the Ukraine, Italy, or Ireland, or through war, in places like Lybia and Syria, is sure. Understand this: What is done to those countries, is being done to yours if you live in the developed world, just at a slower pace–and one day, you, too, will be more valuable dead than alive.

Why Countries Can’t Resist Austerity

Many of you will realize that much of the answer to this is related to the article on free trade. Weakness, national weakness, is built into the world economic system, and done so deliberately. The austerity of the past six years is simply the deliberate impoverishment of ordinary people, for the profit of elites, on steroids. But it is worth examining, in detail, why countries can’t or won’t stop it, and what is required for a country to be able to do so.

Why Public Opinion Doesn’t Matter

We live in the remnants of a mass society, but we aren’t in one any more (though we think we are). In a mass-mobilization society with relatively evenly distributed wealth and income, and something approaching competitive markets, public opinion mattered. If it was not King, well, it was at least a Duke. Today it matters only at the margins, on decisions where the elites do not have consensus. Understand this, and understand why, or all your efforts to resist will be for nothing.

The Golden Rule

Money, my friends, is Permission, as Stirling Newberry once explained to me. It is how we determine who gets to do what. He who can create money, rules. This is more subtle than it seems, so read and weep.

It’s Not How Much Money, It’s Who We Give It to and Why

We have almost no significant problems in the world today which we could either not have fixed had we acted soon enough, or that we could not fix or mitigate today, were we to act. We don’t act because we misallocate, on a scale which would put Pyramid-building Pharoahs to shame, our social efforts.

Higher Profits Produce a Worse Society

No one ever told you that, I’m sure. Read and learn.

The Fall of the USSR

The USSR fell in large part because of constant and radical misallocation of resources. This misallocation occurred because those running the economy did not receive accurate feedback. Despite the triumphal cries of the West and the managerial class who pretend to be capitalists, a version of this exact problem is at the root of our current decline, and it would serve us well to understand how and why the USSR fell.

What Privatization Does

Of all the ideological bugaboos of our current age, one of the strongest is the idea that private enterprise is always more efficient and better. It’s not, but that belief is a very profitable to our elites, and understanding how the engine of privatization works is essential to understanding both our current economic collapse and how the fakely-bright economies of the neoliberal era–especially the early neoliberal period of Thatcher and Reagan–were generated.

What Prosperity Is and Isn’t

It is, perhaps, odd to put this article so far down the list, but it’s wonky and important and not very dramatic. Simply enough, what we define as prosperity is not prosperity, which is why we are sick, fat, and unhappy with rates of depression and mental illness and chronic disease which dwarf those of our forbears despite having so much more stuff. Fix everything else, but if we insist on continuing to produce that which makes us sick and unhappy, what we have will not be what we need or want, nor will it be, truly, prosperity worth having.

The Four Principles of Prosperity

Prosperity, at its heart, is an ethical phenomenon, as much as it is anything else. Without the right ethics, the right spirit, it will not last, nor be widespread. If we want a lasting prosperity, which is actually good for us, we will start by reforming our public ethics.

How to Create a Good Internet Economy

The internet is wonderful, but despite all the cries of “Progress, progress!” it has mostly made a few people rich, created a prosperous class of software engineers who often lose their jobs in their 50s, and simultaneously overseen the decline of the prosperity for most people in the developed world. It has not produced the prosperity we hoped it would. Here’s why and how to fix it.

Concluding Remarks

The above is so far from comprehensive as to make me cry, but it’s a start. I do hope that you will read it and come away with a far better idea of why the economy sucks for most people, and a clearer understanding of the fact that it is intended to suck, why it is intended to suck, and how the old, better economy was lost.


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48 Responses leave one →
  1. Mark Warburton permalink
    October 6, 2014

    Ian. I quickly ran down the list and I had to nod in agreement with every point. I then read the comments on the “Free Trade” article and found my blood pressure rise. I have been saying for years that free trade was a way of breaking the labour force in this country but have been always been discredited by those who clearly were too dumb to see the writing on the wall. Now we have ex auto workers building Korean televisions for nine dollars an hour. Their considered the lucky ones to have a job. I find it truly amazing that in light of the ramifications of free trade agreements on labour, enviroment and the economy overall we should be charging headlong into this affair with China. It won’t take twenty years for people to realize just how we screwed the pooch this time around

  2. Gee permalink
    October 6, 2014

    Is there any recommended order for the reading list? As in, do they build on each other better if read in a particular order? Looking forward to working through the list this week, although I do believe Ive read a few already elsewhere.

  3. Ian Welsh permalink
    October 6, 2014

    They’re more or less in the order I’d recommend though if you want textbook style you could start with “What Prosperity is and isn’t” and then do “It’s not how much money, it’s who we give it to” then start from the top.

  4. someofparts permalink
    October 6, 2014

    For years now, if I mention that I read blogs, the well-to-do liberals in my circle smile at me with paternalistic benevolence and tell me that they confine themselves to reading mainstream newspapers or listening to NPR. However, as we continue talking, on topic after topic, I’m the one who knows more about it from reading websites like this one.

  5. Tom permalink
    October 6, 2014

    Kobane City is about to fall. ISA Chechens and Kurdish fighters, some of whom were born there, and led by a Kurdish commander born in the city have overran half the City while Turkey watches two enemies kill each other and laugh.

    In Iraq ISF has completely collapsed in Anbar and ISA is now shelling Baghdad’s Green Zone and Baghdad International Airport.

    The list of bad news gets worse.

  6. S Brennan permalink
    October 6, 2014

    Yep…

    someofparts permalink
    October 6, 2014

    For years now, if I mention that I read blogs, the well-to-do liberals in my circle smile at me with paternalistic benevolence and tell me that they confine themselves to reading mainstream newspapers or listening to NPR.

    …that definitely is my experience

  7. October 7, 2014

    Great stuff Ian.

    At the risk of seeming to oversimplify what’s a complex human ‘adventure,’ I would recommend that all at least dabble in some work by a York U professor and his partner-in-political economy (Nitzan and Bichler). The title of their book is “Capital as Power” and they are explaining — using pragmatic correlational science and real data — how the 1% have achieved and continue to control the now-global capitalist system (read, increasingly: global economy). Their work is fascinating and — would you believe this? — predictive. They predicted in writing in advance the last 3 oil wars in the middle east from the dip in profits of oil majors compared with top (Fortune 500-type) corporations. Heady stuff that explains, if not all, pretty much all you need to know, about how capital works. Nitzan’s website is http://www.bnarchives.net and the book is available there (free) in pdf format.

    Best to all,

    L.

  8. ossa blixseth permalink
    October 7, 2014

    That conclusion about privatization seems theoretical. I’m sure if you think about it enough, if you’ve lived long and widely enough, you’ll see some situations where the govt’s handling of something is far less effective than a private entity’s handling of it. You should be able to see situations where public sector is a better choice, and others where private sector is. If you can’t see those distinctions, and can’t even consider them, perhaps there’s more to learn.

    When you need to get something delivered in 2 days, what serves you better? An entity like FedEx, or the USPS?

    If your car breaks down, what government entity will repair it for you?

  9. mike permalink
    October 7, 2014

    Well, if FedEx were required to fully front-fund its pensions (assuming it still has any) the way UPS has been required to as a result of privatizing Congresspersons running the playbook of crippling public services through budgets and then claiming the resulting declines are due to inefficiencies, not politics and power, then maybe, just maybe I’d go with UPS. And seriously, car repair? You’re touting the superiority of car repair shops?

  10. atcooper permalink
    October 7, 2014

    I’m a little tired of the war on the USPS.

    FedEx and UPS are profitable in part because the government subsidizes them via the USPS. Who handles the last mile in everything but the major cities?

    In that way, the comment about FedEx is support for Ian’s point.

  11. ossa blixseth permalink
    October 7, 2014

    Hi mike.

    You seem to think that when most people choose a delivery service for a package they want to send 2-day style, they concern themselves primarily with what kind of 401(k) (or whatever) the delivery person has. Maybe my lifetime of interaction has been strangely narrow, but nobody I know ever cares about anything other than (1) will it actually get there in 2 days as desired, and (2) will it arrive without being broken in transit. If you’d like everyone who buys package delivery service to first weigh the retirement and employment benefits plan of all workers employed by that service, I think you’re going to be disappointed when nearly all of the prospective buyers don’t care whether Mr Postman has a slightly better benefits package than Ms FedEx. As to car repair, I simply asked if a government entity does it better, I didn’t say every auto repair garage is exemplary.

    Hi atcooper.

    I don’t know what your subsidy argument is trying to achieve. Is there a point, other than an attempt to reinforce Mr Welsh and denigrate me? Subsidy has nothing to do with whether FedEx or UPS delivers your package as promised, where USPS is usually delayed by days and thus not reliable for quick service. If government subsidy made private delivery better, then the wholly-subsidized USPS should be superior in all aspects. Thus I can’t see your point other than to reinforce Mr Welsh. As to the alleged “war” on USPS, I’m not engaged in any sort of battle here, don’t know why you’d try to describe my simple observations that way. At least you didn’t go wildly impossible, and suggest I’m here on the clock for USPS competitors, trying to help them somehow. But that would be silly, since I don’t really care who “wins” in this war you suggest is ongoing. Finally, saying I’m “supporting Ian’s point” is just a conclusion, and a wrong one at that. Best of luck with your shrine to the blog host.

  12. mike permalink
    October 7, 2014

    Thank you for proving our points. Say hi to Woody, Norm, and Carla for us, Cliff.

  13. Gee permalink
    October 7, 2014

    ossa – the services are not exactly comparable, by choice. If you want to make comparisons, the USPS has express, just like UPS or FedEx, and the cost is comparable. However, that cost DOES have to take into consideration pension benefits, etc, so it’s not an irrelevant issue. The priority mail service does quite nice compared to UPS 2nd day air – it gets there typically within two days, and if you can afford to risk it taking three, then you would make sense to pay the significantly lower price.

    As for auto service, I really have no idea what your point is, besides setting up some kind of ridiculous straw man.

  14. Ian Welsh permalink
    October 7, 2014

    There are specific things the government does well, and specific things the private sector does well. In general, if it’s standardized and universal, the government is better at it, if you don’t handicap the government deliberately. For a US example, see Medicare.

    As others have pointed out, the USPS is operating at a handicap. Even so, I question the assertion that other services are more reliable. I don’t /know/, I haven’t seen a study, but in Canada, I currently prefer the Canadian Postal service: I find them more reliable, especially than UPS, which has claimed to have attempted delivery on more than one occasions when I know they didn’t (I was home.) And if I’m not home, there is a post office near far more places than there are courier offices, where I can easily pick it up.

    That, of course, is anecdotal, not a study, but I know many others who agree. If the USPS is worse than UPS it’s likely because you’ve deliberately crippled it.

    And I’m no spring chicken. I’m old enough to remember times before neolibs deliberately wrecked government services.

    (I personally think the US military is incompetent, but Americans trust it more than any other institution in America. It’s not even close. Might want to think on that.)

  15. subgenius permalink
    October 7, 2014

    Interesting that there is a (manufactured) problem with the USPS – which is one of the few organisations mentioned in the constitution, but no perceived problems with standing military and its ongoing use – which is specifically forbidden by the same…

  16. postmodernism permalink
    October 8, 2014

    change will not occur. The CIA will not allow major revolutions to occur in the US. The power of the military and the elites in washington DC will manage any transition.

  17. Lurker the Third permalink
    October 8, 2014

    @postmodernism

    For those who mistakenly believe that change is impossible because “they” will not allow it, I suggest you review the long history of failed elites.

    A good place to start is the following article (excerpted below).

    http://thearchdruidreport.blogspot.com/2014/09/dark-age-america-senility-of-elites.html

    In a time of drastic change, that sort of limitation is lethal. More deadly still is the other disadvantage I have in mind, which is the curious and consistent habit such elites have of blind faith in their own invincibility. The longer a given elite has been in power, and the more august and formal and well-aged the institutions of its power and wealth become, the easier it seems to be for the very rich to forget that their forefathers established themselves in that position by some form of more or less blatant piracy, and that they themselves could be deprived of it by that same means. Thus elites tend to, shall we say, “misunderestimate” exactly those crises and sources of conflict that pose an existential threat to the survival of their class and its institutions, precisely because they can’t imagine that an existential threat to these things could be posed by anything at all.

    The irony, and it’s a rich one, is that the same conviction tends to become just as widespread outside elite circles as within it. The illusion of invincibility, the conviction that the existing order of things is impervious to any but the most cosmetic changes, tends to be pervasive in any mature society, and remains fixed in place right up to the moment that everything changes and the existing order of things is swept away forever. The intensity of the illusion very often has nothing to do with the real condition of the social order to which it applies; France in 1789 and Russia in 1917 were both brittle, crumbling, jerry-rigged hulks waiting for the push that would send them tumbling into oblivion, which they each received shortly thereafter—but next to no one saw the gaping vulnerabilities at the time. In both cases, even the urban rioters that applied the push were left standing there slack-jawed when they saw how readily the whole thing came crashing down.

    The illusion of invincibility is far and away the most important asset a mature ruling elite has, because it discourages deliberate attempts at regime change from within. Everyone in the society, in the elite or outside it, assumes that the existing order is so firmly bolted into place that only the most apocalyptic events would be able to shake its grip. In such a context, most activists either beg for scraps from the tables of the rich or content themselves with futile gestures of hostility at a system they don’t seriously expect to be able to harm, while the members of the elite go their genial way, stumbling from one preventable disaster to another, convinced of the inevitability of their positions, and blissfully unconcerned with the possibility—which normally becomes a reality sooner or later—that their own actions might be sawing away at the old and brittle branch on which they’re seated.

  18. Tom permalink
    October 8, 2014

    Its over, ISA is bring the Tawheed Flag into Kobane, posting pictures of its soldiers burning cigarettes, booze, porn, and drugs confiscated from PKK/YPG stocks.

    Kobane has fallen.

  19. October 15, 2014

    This may be the hardest thing to explain to anyone with a connection to power or money: the bailouts are WHY the world has a lousy economy; not why it isn’t even worse. If you cannot understand why this is so, if you cannot understand that other options were, and are, available, other than making people who destroyed the world economy even richer and more powerful, then you will never see a good economy ever again.

    Yes, but that would entail someone belling the cat…

  20. Bill Hicks permalink
    March 10, 2016

    This post is like a primer for why Sanders and Trump are doing so well in the presidential race. It is too bad that Bernie’s supporters and the working class Trump voters who are attracted to his economic populism (rather than the bigots and racists) can’t be consolidated behind a third party candidate as authentic as Bernie but 30 years younger and with more forward-thinking ideas.

    THEN, you’d have a revolution in American politics worth supporting.

  21. March 10, 2016

    Q3 ’79 was the date.

  22. highrpm permalink
    March 11, 2016

    “how to create a good internet economy,” from someone who speaks from experience: the brutality of wall street — crush the competition/ winner take all. further, an economy that bleeds its youth to take profit from the cost of their necessary education deserves to crash like the acclaimed fall of the the twin towers. if aging societies advance to such ends, it makes the hypothesis of earth being a prison planet seem reasonable.

  23. Steve Ruis permalink
    March 11, 2016

    You could also add that no modern economy was ever built upon free trade. Consider China, Korea, even Japan. (Try selling rice in Japan if you think they have “free trade.” Free trade is an economic weapon one country can use against another. It sounds good but it essentially locks countries out of competition with the dogs at the top. Comparative advantage is basically “Keep mining your resources and send them to us, we will convert them into things you need and you can buy them. We’ll even lend you the money to do so! Then we will accept those resources as debt payment and you will have next to nothing when we are through with you.”

  24. Tom permalink
    March 11, 2016

    Interesting things today:

    Turkish Parliament will soon be voting to strip five prominent HDP members of their Immunity for supporting terrorism. That the charges are true is rather besides the point. CHP and MHP are aligning with AKP on this even though it will weaken their clout as Erdogan can then pick up the five votes he needs.

    Syria: Southern FSA seized both sides of the Al-Tanf and Al-Walid border post on Iraq and are advancing on Al Bukamal. They recently received a load of weapons from Jordan and Saudi Arabia.

    SDF is advancing on Deir Ezzor City backed by SAA Tanks and Artillery and US and Russian Air Support and by some accounts are 10-20km from the city.

    Northwest FSA went on the offensive with Turkish artillery support against both IS and SDF.

    1st a Kurdish FSA Battalion (Faylaq al-Sham) seized Dudiyan from IS assisted by Turkish Artillery and are moving on Jarabulus supported by Turkish Artillery. Who says Erdogan is anti-Kurd and pro-IS now?

    2nd FSA forces around Azaz retook Shaykh Isa and are advancing on Tel Rifaat assisted again by Turkish Artillery.

    3rd FSA Groups backed by JAN south of Afrin retook Shaykh ‘Aqil and are pushing north supported by Turkish Artillery Fires.

    Also FSA has begun clearance operations against Sheikh Masqoud Neighborhood.

    FSA has declared SDF terrorists and aim to destroy them and bring down their cantons. They are all sporting new Turkish and Saudi Arabian Military equipment as well in pictures. They also reiterated there will be no negotiations with Assad, they will bring him down whether the West helps them or not. I don’t blame them.

    As things stand, FSA still has a growing force structure and is consolidating more into a single command structure and getting better at fighting. Assad by contrast is relying more and more on Hezbollah and PMUs from Iraq to fight his battles with his Regular Forces and NDF running sparse on replacements. Hezbollah, however, can’t keep hemorrhaging resources at the current rate, so soon it will be the PMUs plus whatever Iran and Putin decide to feed in.

    It ultimately will come down to who bleeds out who first.

  25. Hugh permalink
    March 11, 2016

    The economy is not an autonomous beast. It is merely how a society produces what it needs to do what it wants to do and maintain itself. And when I say it, I mean we. The economy serves society, i.e. us. Or it should, but clearly doesn’t. So the first question we should be asking is what kind of a society do we want, and then we should use that as the measure of our economy’s performance.

    What we have now is kleptocracy, a society ruled by thieves. Our economy is a massive criminal enterprise geared to steal our wealth, our labor and resources, and deliver them into the hands of a few, the rich, and those they employ, the elites. We must first and foremost understand and internalize the criminal nature of what is going on. These are not mistakes by otherwise well-intentioned people or the result of events no one could foresee or control. They are part of a struggle which has waxed and waned between the haves and the have-nots that began centuries ago but which took a dramatic turn in the late 1970s leading to the fullblown kleptocracy we have today. What is different is the degree to which money has become untethered to any productive activity, and the brazenness of our rich and elites who now not only will loot to the crash of the whole financial system but then loot that crash as well, –and do so with little or no opposition from the rest of us.

    I offer this as a kind of parallel view to what Ian has written.

  26. Hugh permalink
    March 11, 2016

    Tom, you ask, “Who says Erdogan is anti-Kurd and pro-IS now?”

    But you yourself point out that Erdogan is moving to strip and accuse of terrorism five members of the pro-Kurdish Peoples’ Democratic Party, the HDP. And you say the Turkish backed Free Syrian Army (FSA) has declared the SDF (the Syrian Democratic Forces) which are in part Kurdish to be terrorist. Indeed this last can be seen as a response to the SDF’s increased coordination with Russian and Syrian government forces, as well as its Kurdish makeup.

    It has not been unusual in the Syrian civil war for opponents to tactically aid each other temporarily and against some third party. And a little artillery support, if it occurred, could have been also to appease the US and counterbalance Turkey’s other anti-Kurdish moves, the Kurds being the main US allies in the area.

  27. Tom permalink
    March 11, 2016

    Hugh

    Erdogan is not anti-Kurd, AKP gave Kurds human rights and they form a large part of AKP’s electorate.

    PKK and SDF are terrorists who are engaged in ethnic cleansing and terror attacks in Turkey and Syria and are just as bad as IS. Turkey dos not tolerate that. FSA which previously left the YPG largely alone only to be stabbed in the back is through with that and aims to destroy the YPG thugs and remove their cantons which are communist dictatorships that kidnap and train child soldiers and sex trafficks women who fail to pass their military training camps.

    YPG are not Freedom Fighters they are the Syrian Branch of the PKK and damned with no place in this world.

    FSA is fighting for a democratic Syria not ruled by strongmen, but by consensus.

  28. highrpm permalink
    March 11, 2016

    “the decline and fall of post war liberalism”. a good read and appropriate for the day, nancy reagan’s funeral. simpletons. wall street enablers. brutal f*kers.

    i read rachel maddow’s wiki entry after listening to her exhaustive and mentally tiring overblown hate rant about trump’s cancelled chicago rally and the racial tensions the protests outside the venue displayed. reminds me of 1968. which she made no mention of. a doctorate in politics — whatever that means — from oxford, she proudly says of herself, “I’m undoubtedly a liberal, which means that I’m in almost total agreement with the Eisenhower-era Republican party platform.” wtf?! she would do well to read you, ian. unless my simpleness causes me to not understand liberalism as you write about it, ian.

  29. Lisa permalink
    March 12, 2016

    Gpod summary of the current neo-liberal consensus”
    Gaius Publius: The Goal of the Neo-Liberal Consensus Is to Manage the Decline

    http://www.nakedcapitalism.com/2016/03/gaius-publius-the-goal-of-the-neo-liberal-consensus-is-to-manage-the-decline.html

  30. Billikin permalink
    October 4, 2017

    As for the Fed in 2009-10, arguably they mitigated the disaster, despite some mistakes. We could easily have had another Great Depression, instead of the lesser depression we got. The main economic culprits in the US, as far as I can tell, were the Obama administration and the Democratic Congress, which made only half-hearted efforts at an economic recovery. Save Wall Street, fuck Main Street. As for the Tea Party Congress after 2010, I can’t blame them too much, because they did what the said they were going to do. I blame the electorate for them.

  31. October 4, 2017

    Thanks for sharpening the historical processus; trenchant and timely to see. I read this, as I look at the daily parade of news, and keep asking: Where have I seen or read this before? Then it hit me — Gibbon!

    It is always stunning, in the West, to consider how enduring a deceptive illusion of democratic progress has been. So many initiatives sold as advancements for humankind — when they always, ultimately, do little more than ensure our continued slavery.

  32. bob mcmanus permalink
    October 4, 2017

    As for the Fed in 2009-10, arguably they mitigated the disaster, despite some mistakes.

    I strongly disagree with Scott Sumners politics, but I think he is right about the Fed. The Fed, with forward guidance promising an inflation ceiling can always determine an upper limit to growth and the effects of fiscal stimulus. Had the Congress voted 3 trillion in infrastructure spending the Fed could have raised rates to 10% and sopped the recovery dead in its tracks.

    All the good recoveries and expansions are accompanied by high inflation. I give the Fed at least equal responsibility for this Long Recession.

    (My idea in 2009-2001 was for the Fed to buy as much overseas debt instruments as were available, thereby devaluing the dollar and making it not a safe haven, and providing Greece Italy and so on debt relief. How much? Until they make us stop, in other words global double-digit inflation. Still possible, but obviously unlikely. Buying US debt simply hols interest rates and inflation down.

  33. Billikin permalink
    October 4, 2017

    bob mcmanus: “Had the Congress voted 3 trillion in infrastructure spending the Fed could have raised rates to 10% and sopped the recovery dead in its tracks.”

    Indeed, the could have. How long do you think the Fed would have lasted if they took it on themselves to kill the recovery? The Fed is only quasi-independent. It is ultimately a creature of Congress.

  34. bob mcmanus permalink
    October 4, 2017

    How long do you think the Fed would have lasted if they took it on themselves to kill the recovery?

    Catalonia …longish, but about what Spanish control of banking and finance could do if independence is declared. We saw a little of this in Greece.

    Reagan could fire Volcker thirty years ago, but we are much more globalized now. Central Banks rule, and are untouchable and can drive a nation to its knees in days. The ECB will support inflation fighting to the point of a global crash. You do understand what Greece has gone though because resistance was futile?

    They own us since 2008. This is why I want revolution, and why it terrifies me.

  35. Billikin permalink
    October 4, 2017

    @ bob mcmanus

    Spain and Greece do not have their own currencies. The European Central Bank is beyond the control of any country in the Euro zone. As for other advanced national economies, the US, Canada, the UK, Australia, Japan, China, et al., they are ruled by their central banks only if they let themselves be. As for Volcker, he did what Carter and Reagan wanted him to do. It is true that politicians can pass the buck to their CB, which can take politically unpalatable actions. The myth of CB independence (outside of the Euro zone, where it is a fact) is convenient for many politicians. That does not mean that CBs actually rule.

  36. realitychecker permalink
    October 5, 2017

    The capitalist ideology itself demands that failures be allowed to fail.

    The bank bailouts were a clear violation of that basic principle.

    No excuses will suffice.

  37. Billikin permalink
    October 5, 2017

    The capitalist propaganda demands that failures be allowed to fail.

    Fixed that for ya. 😉

  38. realitychecker permalink
    October 5, 2017

    @ Billikin

    No, you are quoting the corrupted version.

  39. Peter permalink
    October 5, 2017

    @RC

    The government was intervening long before this crisis to bail out failing businesses that were deemed too important for the whole economy to allow to fail, such as the auto industry. Capitalism didn’t save them the taxpayer did with the only other option a full implosion of the local or national economy. The capitalists sat back and let Leman Brothers die clutching their cash and wouldn’t even make overnight operating loans to their partners.

    These entities are TBTF because there isn’t anyone else that can handle the sheer volume of money they invest for people and institutions . We saw how quickly the economy nosedived from the interruption of this cash flow and how slowly it recovered when the runways were foamed.

  40. realitychecker permalink
    October 6, 2017

    @ Peter

    You are certainly correct that the govt interventions started corrupting true capitalistic principles long ago, but I think you must agree that the bank bailouts represented a notable crescendo.

  41. Peter permalink
    October 6, 2017

    @RC

    Capitalist Darwinian selection is still operative in the business world, there were over 60 notable banks and financial institutions allowed to fail after the crash. I read that 70,000 manufacturing businesses closed their doors during the Great Recession, I do have trouble believing that number but it is possible.

    Now that we have moved past the worst of this economic crisis with full employment, improving GDP growth, housing prices recovering and profits returning I can ask what would or could have happened if the MOTU’s had been more harshly punished and denied their bail-outs.

    Few people seem willing to look into that abyss but a full blown world wide depression was already more than possible before liquidity was restored to the system. The size of the capital injections was astronomical but that just reflects the size of the threat.

  42. realitychecker permalink
    October 6, 2017

    @ Peter

    You can’t simultaneously believe in free market theory and also believe in the efficacy of market ‘management,” Peter. If you do, you are just operating by seat of pants, which might be fine pragmatically, but can lay no claim to philosophical or linear logical support.

    If the banks had failed, someone else with better judgment about risk would have come forward to take their place, and we would not now be in a major risk situation once again, because the lesson would have been learned much better than it was.

    Competitive failures are painful to the failures, but increase the sharpness of everyone else. That is supposed to be one of the virtues of capitalism. As you well know.

  43. Peter permalink
    October 6, 2017

    @RC

    Capitalism is full of contradictions and I’ll leave it to others to rely on theories that seem to make them more frustrated and stuck on some ideal. Financial capitalism is different from manufacturing capitalism and many other forms of capitalism so they need to be addressed separately while recognized as being interconnected.

    If the MOTU’s had been thrown into the abyss they would have dragged many other financial businesses with them. I wonder where this stockpile of MOTU’s with better judgment is stored waiting for their chance to come forward along with all the necessary connections to investors and a reputation good or bad. I’m sure they would have eventually regrouped and started up business again but what would have been left of the world economy by then?

    I never bought the creative destruction idea about competitive failures unless the company was producing shoddy products. It seems to me that two or more companies offering the same product in perpetual competition would better serve consumers. Price competition along with competition driving productivity investments and more innovation should benefit everyone.

  44. realitychecker permalink
    October 7, 2017

    The banks WERE offering shoddy products, Peter.

    Look, I get into trouble with all the purity lefties because I mix and match, trying to get the good stuff from each side and reject the bad from each side. So, pragmatism as an operating principle is OK with me.

    But, as you well know, most people who engage in these discussions seek to bolster their opinions with a background philosophy.

    I’m saying to those people who use the capitalist philosophy to bolster their preferences/opinions that saving the biggest actors who deserve to fail for their behavior is an abject betrayal of that philosophy, of such a magnitude that they can never again be perceived to be arguing the philosophy in good faith or to be deserving of any credibility.

  45. Peter permalink
    October 7, 2017

    @RC

    The arguments about theory and philosophy of capitalism seem to be endless PR exercises comparing what could be with what should be. The alternative to capitalism, collectivism has shown itself to be a dead end with lots of dead people and lost freedom in its wake even more than under capitalism.

    Punishing the Dimons of capitalism, more than they were, for their part in the crisis may have made some people feel vindicated but they might have those feelings while in line at the soup kitchen under the guard of a new authoritarian regime. This scenario might not be likely but it is possible.

    The people who bought the shoddy financial products were supposed to do their due diligence even with ratings agencies approval. They must have seen the increasing risk in our explosive housing price bubble and construction frenzy. Their growing demand for the returns from these products certainly helped to push the MOTU’s to add more risk to their product because it all had to keep moving.

    I think it was GS that was buying CDS’s to cover their anticipated loses and this really enraged some people when it was revealed but they were reacting to a juggernaut that they didn’t really control. Some people want this story related as a melodrama but even the bad guys in this story were carrying out their part of FDR’s plan for widespread home ownership.

  46. realitychecker permalink
    October 8, 2017

    @ Peter

    I respect you for your obvious intelligence in many other comments, but on this topic you continually seem to be completely missing the big picture.

    The criminals had fellow criminals in place to forgive their crimes for them. Each actor is responsible for his/her own bad acts and choices.

    Stop apologizing for all the corrupt actors who got mega-wealthy by cheating, and then got a pass from their buddies.

  47. Peter permalink
    October 8, 2017

    @RC

    I must not be too smart because I continue to drive you to trash-talking. The sad truth is that the MOTU’s who almost destroyed the world squeezed enough money out of the government to save the world and we have to live with that.

    The next crisis developing today is the Israel/Hezbollah war that seems imminent, have you heard anything about this? Iran is supposedly planning to push their own and Iraqi militias from Syria into the conflict probably in Lebanon. Hezbollah is threatening to launch thousands of rockets a day and one misstep by either side could set this into motion before either side is ready.

  48. different clue permalink
    October 10, 2017

    Here is a little anonymous email from somebody to somebody that I saw on Reddit. I don’t know how representative it is of the Clintobusha economy prepared for young people, but it certainly seems emblematic.

    I can’t “copy-paste” from an imgur, so here is the link.

    https://i.imgur.com/EUAuF4q.png

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