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François Hollande: A Modern-Day Napoleon?

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I wouldn’t look to the American political scene to provide the impetus to any meaningful social change on a global scale. Despite all the hoopla associated with the 2012 election, U.S. foreign and domestic policies are almost certain to remain unchanged, and that’s regardless of who will be the next occupant of the White House or the ultimate composition of the 2012 Congress. The winds of change are, however, in the offing, and they come from the least expected of quarters: the beleaguered nation-states of Europe.

The election results in Greece and France are indeed most promising. One doesn’t know about Greece, for it’s still a minor player, but France is one of the premier members of the EU, and the change of its regime is bound to have severe repercussions on the future of that union and the Eurozone.

One shouldn’t use the American yardstick when evaluating the significance of these events. France doesn’t have the exact same parliamentary system as we do, with its emphasis on checks and balances, all too often resulting in inaction and gridlock, and the power of the executive is considerably more pronounced than the one to which we’re accustomed here. The president-elect is known to set the tone for the rest of the nation and for the duration of the term, and there’s no reason to think this should change; if anything, the severity of the global economic crisis facing the EU and the rest of the world virtually insures the French will stay the course.

Aside from the relative merits, the pros and cons, of either parliamentary system, there’s another thing to consider. The U.S., for all its woes, is still the economic powerhouse and the acknowledged leader of the free world. France, though a major player, is not. Consequently, one can only expect more of the same from the former, intent as it must be to maintain its hegemony; France and the like are unhampered by such concerns.

My real enemy doesn’t have a name or face or a party. He’ll never run as president; and so, he’ll never be elected, although he does govern. My enemy is the world of finance.

You can bet your bottom dollar the aforementioned pronouncement by the new president-elect, François Hollande, is not just another Obama campaign promise. He hadn’t collected millions from Goldman Sachs for his re-election effort, nor does the world of finance exercise the same stronghold on the French as it does in the land of the thief and the slave. No doubt, pressure will be applied from all the expected quarters for the French to behave “responsibly,” and some of it may take hold. Still, I don’t expect smooth sailing.

Most importantly, perhaps, a message has been sent to the Anglo-Saxon establishment, the presumptive leader of the world economy, that all bets are off. Berlin, London and New York – all have been put on notice. If the only result will be to curb U.S. imperialistic ambitions, so much the better and it will not have been in vain.

In what do I base my confidence? The situation at hand reminds me of the fallout which preceded the dissolution of the Soviet Union. Poland, Yugoslavia, the Czech Republic, Hungary, each an insignificant satellite state when taken in isolation, together have succeeded in toppling a first class empire.

If U.S. imperialism can be dealt the same blow, and the odds are better than good, we should all be the winners. Even if it takes an interim “socialist” solution.

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About Roger Nowosielski

  • roger nowosielski

    David Graeber related entry, Ana.

    It looks as though the notion of debt reduction/liquidation becomes a part of everyday discourse, as per the following podcast:

    “Daily Wrap.”

    See two segments, one starting at 7:54 into the podcast, the other at 30:55.

    I’d be skeptical of the take on Mr. O’s message, but still. The second part, however, is of greater interest in that, although it might involve a measure of co-opting, it’s a positive type of response on the part of the local community, Niagara Falls in this case, coming to grip with a nationwide problem.

    Also see news story concerning the latter.

  • Anarcissie

    Actually I think there was some mention of such things, at least in the comments section. CS himself commented that at some point in the near future he intends to respond to some of the other commenters. Of course, people may be talking past one another as usual. CS’s essay seemed to be about whether a centralized economy can be ‘optimized’ using advanced computing power, and some of the objections, such as that people will lie to the central authority, and that they don’t know what they want, seem to me to be insuperable problems regardless of the mathematics employed, simply as a matter of the most basic logic.

  • Igor

    I glanced at the article, lots of words, no mention of stochastics or dynamics. That was OK 70 years ago when all the independent variables were controlled and you wanted to use OR to select bombing targets in Japan, but now it’s not enough.

  • roger nowosielski

    Yes. Fortunately, Cosma has sufficient conceptual understanding of how to fit all the pieces in their right place, not to mention the math part. He/she has a bird’s eye view as well great command of the minutia.

    BTW, Paul Cockshott was one of the respondents. He comes from the same, computer science background, though he, too, ends up with analysis of ideas.

  • Anarcissie

    One of the (other) commenters noted that the quest for optimization is related to the quest for power. However, most of them seemed to want to talk about the math.

  • roger nowosielski

    Fascinating article, Ana. I skimmed the math part (am not as facile with the concepts of linear analysis as I used to be), but the last three sections of Cosma’s article are priceless.

    A number of off-the-cuff observations:

    (1) The institution of the market, even under the best imaginable circumstances, is not to be discarded, there being nothing to replace it with. The resulting alienation is something we may all have to live with. I like Cosma’s comparison of the market to any other social structure of human design, with respect to each of which a quotient of alienation is a natural by-product.

    (2) I see here an argument unfolding to the effect that economics (and the sphere of economics) is not to be regarded as an end in itself, only as a means to serve human purposes. Which is why your comment about the ultimate value of “optimization” is a pertinent one. We can’t lose sight of the fact that the well-being of the economy should never be an end all be all, but only subservient to social needs. But the capitalists and the planners both err in this respect, when they regard optimization as the ultimate goal.

    (3) Further, Cosma’s article re-iterates the supremacy of conceptual analysis to any results which might obtain from using mathematical models. Math is just a tool and as such, it can’t provide us with the answers. It can only be put to hopefully good use by the leading questions. It’s all in the questions. Economics, besides, is not like physics, standing as it were on its own.

    (5) Cosma refers to a fairly even distribution of income in order to alleviate some of the market inequalities. Well, Cockshott’s idea of labor-based money system just might go a long way towards achieving this end. You might want to look at his video anyway, part one. It’s only ten minutes or so.

    Troll might comment more intelligently on the mathematical aspects of Cosma’s paper, but I doubt his conclusions would be much different from mine.

  • Anarcissie

    While you’re waiting for me to see the video, which may take a while, observe that Cosma Shalizi has a rather long consideration of the computability of economic planning in Crooked Timber. It’s quite a tour de force. I myself was impressed enough to have done a little carping in the comments section there.

  • troll

    …power corrupts

    will organize for food

  • Igor

    There’s only one thing that can help the poor forlorn individual citizen: ORGANIZE!

    That’s what capitalists do when they form a corporation.

    That’s what auto workers do when they form a union.

    That’s what consumers do when they form a consumers union or a co-op.

    The individual citizen has NO bargaining power. Nobody cares about you. Until your group has power!

    The way to get power is:


  • roger nowosielski

    The following is as close as it gets to your labor-based valuation of money idea, Ana. The link is to part one of a three-part presentation by Paul W. Cockshott from his book, Towards a New Socialism. At the end of each segment, you will be re-directed to the subsequent one.

    As an anarchist, I have reservations, of course, concerning Cockshott’s view of the state as the ultimate solution, though he is careful enough to preface it by saying it must be a “democratic” state. Even so, some of his ideas, I think, are on target. (BTW, only part one deals specifically with your notion, specifically, with converting money into “labor vouchers.”

    Your thoughts?

  • roger nowosielski

    Got a point about Assange.

    As to the voucher’s idea, I should be able to provide some references soon.

  • Anarcissie

    There are local monetary systems based on hours of labor, but not everyone values everyone’s (their own and others’) labor at the same rate. This, along with unfamiliarity, inhibits wide acceptance of the idea.

    Bringing Assange to trial in the U.S. will be highly problematical for the present administration, since he will immediately become an exciting focus of leftist political activity, just when Mr. O wants to make leftie noises and gestures. Something else is probably planned.

  • Igor


    Why don’t we pay oil company subsidies in vouchers? Because they won’t stand for it, that’s why. They know that vouchers are a gyp.

    Why don’t we pay senators and congressmen in vouchers? They, too, know that vouchers are a gyp.

  • roger nowosielski

    Interesting idea. I believe a British socialist, can’t think of the name offhand, suggested the idea of getting paid in vouchers for the hours of work performed.

    On a somewhat related note, here’s an excerpt from Amy Goodman’s show today” on the decision to extradite Assange back to Sweden for questioning.

    Looks like the Western powers are all in on this together, solidified as they may well be by their common financial interests as well.

    There ought to be a way of offering Assange a political asylum by Switzerland or some other “neutral” jurisdiction. Meanwhile, however, the Western governments have managed to divert our attention from their duplicitous dealings behind closed doors to character assassination.

  • Anarcissie

    The price of commodities can be manipulated; in fact, they usually are, since the rarer commodities are unevenly distributed and are generally susceptible to the power of a few governments. Therefore, the value of money can be manipulated by pushing the price of the basis commodity in one direction or the other.

    Ideally, I’d like to see some way of basing the value of money on labor. I haven’t thought of any clever, convincing way to do that yet.

  • roger nowosielski

    Let me see whether I got it right, Ana.

    (1) Right off the bat, we have two diverging POV’s as to the nature of money: the working stiff, etc. who’d like to see it maintain its value, especially in light of the rapidly eroding purchasing power, and those who run the world of business and finance. These elites have no stake in having money represent certain value because they’re in the business of “manufacturing” money (and value; that’s in fact how they become enriched (at least during this late, declining stage of financial capitalism). So Krugman is either unaware of the fact, a doubtful presupposition) or simply espouses the elite view.

    (2) Michael Hudson’s focus is, naturally, on consumer debt, since it it the poor working stiff who bears the brunt of the decline of real purchasing power, with wages being fixed while finance/loan costs keep on rising. If forty percent or more of one’s income automatically goes into servicing debt, there’s very little that’s left by way of discretionary spending, to say nothing of generating sufficient demand to stimulate real productivity and real economy.

    (3) Even though holding down the purchasing power of the poor down to the minimum cuts the capitalist’s nose to spite his face, this schizoid monetary policy espouses the capitalist ideology (which is why it shows up as one of its many contradictions). Making the poor believe that money is “real” and that it must be paid for dearly while holding themselves up to a whole different set of standards only reveals the capitalist’s pathology, to say nothing of extreme duplicity; but this again, is only expected.

    (4) Apart from commitment to the capitalist most of production and finance, why should the Treasury endorse the kind of monetary policy espoused by Krugman et al? Since the Treasury keeps on incurring a mountain of debt, it’d serve its interest to keep the value of the dollar low in order to minimize the burden.

    A question: In light of the above, would you recommend returning to, say, the gold standard? What difference would it make.

    In any case, if my reading of your comment is fairly accurate, I think your analysis is spot on.

    BTW, you might want to chime in on the following discussion, “Education is not a Right.”. It touches on some aspects of our topic, if only peripherally.

  • Anarcissie

    The basic thing that disturbs me about Krugman and company is their apparent belief that money does not and should not represent anything. Therefore, it doesn’t matter how much money you print or how big your debts are — it’s all meaningless. I intuit that many of the easy money folks have contempt for those who save money or have currency-denominated investments or are stuck on fixed incomes. We all know what kind of people they are: (1) poor; (2) stingy; (3) anal; (4) lower-middle-class (or worse). Ugh! Not sexy! But maybe I’m wrong about that; doesn’t matter.

    So anyway, for instance, reducing the interest rates on huge debts may seem like the equivalent of reducing the principal, but it really isn’t. Sooner or later that principal has to be paid, or it’s funny money. If someone did labor for it, and it just vanishes or is significantly diluted, they’ve been robbed of a part of their lives. At least in the framework of money, labor, capitalism, and so on.

    There are large debts that shouldn’t exist, of course, like the famous student debt. If we bring children into the world, which is necessary to replicate and continue our community, we are obliged to fit them for life, which for most people in the current insanely bureaucratized arrangements of our social order means having a college degree, however meaningless that degree may be. Therefore, there should be at least public (state-funded and operated) universities with free tuition, as there were in many places like New York City and California until the 1970s. But I digress.

    There’s was a recent discussion on Naked Capitalism which I entered with a hint of my own theories about money. I think it was posted on 5/24 so you might be able to find it in spite of the busyness of that blog.

  • roger nowosielski

    Any thoughts concerning my query in #105, Ana?

  • STM

    Yes, my credit union was originally a media and publishing outfit. They’ve since amalgamated with a larger outfit, but the service is the same. And there is no restriction on membership. That is the case in Australia and Canada by the sounds of things, but it might be different in the US.

    Mine offers the full range of banking services, but with no fees or very little fees for most things.

    That’s not the reason they’re good, though. They get to know you and treat you like a person. Having had an awful mortgage experience previously with a variable interest rate higher than it should have been, I now have my home loan with the CU. It’s the way to go.

  • Igor

    CUs were originally formed around employment, but as people changed jobs that uniting function was replaced by ‘affinity’, which could be a profession, or a church, or a club. It could, eventually, just be a fictional affinity.

    CUs often place their funds with commercial banks and in commercial instruments, which may seem odd. The advantages that accrue to CU members are from the increased efficiencies and reduced overhead of the CU.

  • When I lived in British Columbia I used a credit union instead of a bank. I found them superior in every visible respect. There was no restriction as to membership. But I assume they labor under some legal burden in this area, because one seldom hears of them, except for the Civil Service employees’ MCU. However, this Melrose outfit appears to be workable. I don’t get the function, real or supposed, of the membership restrictions imposed on or by most credit unions.

  • Well actually, for the deneral public they offer membership in “Friends of Whittemore…a non-profit organization that supports the environmental education and habitat improvement programs of the Whittemore Wildlife Sanctuary in Oldwick, NJ.”

    There are other participating organizations, but you might have to join the Essex County Lions Club or something.

  • roger nowosielski

    That’s a better idea than delimiting membership by employment, which is a shaky proposition nowadays. So if you’re a member of the Sierra Club or the World Wild Life, you’re eligible.

  • Here is another credit union which allows deposits via personal computer and scanner. You have to give $5 to some nature fund to join. This option is only available to NJ, NY. and PA residents, though.

  • STM

    I don’t know how credit unions work in the US, but I’d assume they’re the same as in Oz. I have been a member of one since the 1980s. They are always the first to reduce their mortgage interest rates when the Reserve Bank drops the official cash rate )most Aussie mortgages are set on a variable rate and move up and down depending on what the official cash rate does); speaking to them on the phone is a pleasure (they’re in suburban Sydney, rather than suburban Delhi, so not only are they easy to understand and have their finger on the pulse, they’re getting paid decent wages and part of the philosophy is a duty of care to members).

    If you have propblems, they are always willing to talk. Not being for profit but having a philosophy of members and customers first rather than profits first is rather refreshing.

    The big four banks in this country lost me years ago (with the possible exception of one, which has tried of late to become more customer-oriented and has had some success, but old beliefs DO die hard). I hope others doing business with big banks realise that in the great scheme of things, smaller customers mean diddly squat to the big banks.

    Except, of course, when their practices lead to enough people deserting them and it starts to eat into their profits.

    Credit Unions are a godsend in this respect. Good credit unions are even better, so do your homework first.

  • Anarcissie

    Thanks for the URLs, Roger. It’s odd that I didn’t come up with Melrose on my own search, which turned up some very odd little outfits but nothing large and general that wasn’t restricted to, say, city employees or the like.

  • roger nowosielski

    Re: Michael Hudson’s article:

    (a) do you see him as making a qualitative, rather than quantitative distinction? Why is not a reduction of interest rates on outstanding debt “closely equivalent” to debt forgiveness? And if not, are we talking about moral stigma and personal distress only?

    (b) it seems Hudson’s emphasis was on consumer debt. So the question; why should the Treasury be against consumer-debt forgiveness unless it would be impacted negatively by the aftereffects in the US financial sector. And if it wouldn’t be so impacted, then, would it simply be an ideological stand?

  • roger nowosielski

    check this one, Ana.

  • roger nowosielski
  • roger nowosielski

    Must be a vestige of union privileges. So if you’re not in the union, tough luck.

    Time to loosen up those restrictions and start community-owned banks.

  • A lot of credit unions have very relaxed membership requirements nowadays. My wife was able to get her sister into the educational credit union we belong to on the strength of her being the sibling of someone who had once been a substitute teacher.

    There’s got to be one that will let you join. Perhaps even an out-of-state one, since you’re close to New Jersey and Connecticut. Keep looking.

  • Oddly, I can’t find a credit union around here which I’m permitted to join. There is one not far away, but it’s only for poor people (or those who know somebody). The others have similar membership restrictions. I speculate that it has something to do with the laws, considering this is New York — bank city. And state. But I haven’t had time to research the question.

  • Igor

    94-Glenn: intrinsic value of tulip bulbs remains the same, it is just the extrinsic value that is exaggerated because of the gambling leverage it supplies.

  • Igor

    @92-Anarcissie: Credit Unions are good because they are operated by bureaucrat employees rather than capitalists, so the risk is greatly reduced, thus yielding higher returns to savers and lower costs to borrowers. There’s no added costs for speculation, and why should there be? Bankers SHOULD be simple bureaucrats who shuffle money between savers and borrowers.

    And all that is true even when the underlying investments are the same: CUs are more efficient than banks.

  • STM

    That seven weeks doesn’t include weekends BTW. You get those thrown in for free, so add them on and you’re looking at a substantial bit of vacation time.

    Geez, I love this country … why you’d want to live anywhere else but Oz is beyond me. Seriously, and not just for the food, wine and beer, the sun, sand, surf and fishing, or the general hedonistic lifestyle.

    It’s living proof that you can have your cake AND eat it. AND enjoy it.

    Perhaps Oz is an apt name. The wondrous place at the end of the Yellow Brick Road, and it actually exists. F.ck, how good’s that?

    That’s what happens when you send a bunch of convicts to a place to set up a colony they can never leave, 13000 miles from home on the other side of the planet. They turn it into an egalitarian paradise.

    I reckon when the Poms sent all the bad people here 200 years or so back, they made a dreadful mistake. What they should have done is send all the good people here and leave the criminals to fester on a cold, windswept bit of rock in the North Sea. You, know … Britain.

    They were right to give up on America, but with us, big error.

    Poor buggers. Now they’re banging the door down here trying to get in … and mostly, they can’t. We’re a bit more choosy these days 🙂

  • STM

    “It’s probably better to reduce the workweek to, say, 32 hours, and increase paid timeoff to say, 5 weeks a year”
    I get seven weeks’ a year annual leave, because I work nights, weekends and public holidays. However, it’s pretty standard in Oz to have four weeks’ paid annual leave PLUS all the public holidays and associated long weekends, which in reality add up to at least another two weeks. I mean, we even celebrate the Queen’s birthday with a long weekend here, and not even on her birthday. Lol.

    And last time I looked, the country wasn’t even close to going down the gurgler. We didn’t even have a recession during the GFC, and uneployment’s remained at around 4-5 per cent all the way through.

    Add universal health care and a whole range of other stuff, and it’s obvious anything’s possible if things are structured properly.

    But working 32 hours a week? That just silly, really.

    In gthe game of give and take, it can’t be ALL take.

  • Glenn Contrarian

    Ana –

    Just before the ‘movement’ away from Bank of America, last year, we switched from BofA to the Navy Federal Credit Union. We’d been with BofA for just under twenty years, but we got tired of how they were sitting on my retirement checks until the last moment before they credited my account. They were very convenient in a lot of ways, but they were unnecessarily costing us money. Besides, it just feels better to be in a nice, relatively safe, and MUCH more socially-responsible credit union.

  • Glenn Contrarian

    Igor –

    I disagree. The worth of something (and, by extension, the wealth of the owners of that something) is often based not upon its actual value or the amount of labor that went into its manufacture or preparation, but instead upon the perception of its value. This was true during the “tulip bubble” of 1637, of the housing bubble of the early 2000’s, and of every IPO ever held.

  • Igor

    @79-Glenn: “Global finance is not a zero-sum game.” Actually, it is, because money is constantly fed to it by ‘externalities’, one of which is the efforts of labor which is what produces ALL wealth.

    Global finance is just sort of a parasite. In fact, global finance is more like the rightist nightmare of government than actual government is. But the rightist is prohibited from seeing that by his ideology.

    Finance can produce NO wealth overall.

  • All ‘we’ ever needed to do was bank at credit unions.

  • Igor

    You can avoid huge problems by only allowing small problems to develop. We should assiduously break up large institutions and NOT allow big mergers and acquisitions. Mergers do not make things safer by providing more capitalç they make things more dangerous by eliminating competition and making the stakes higher at every point.

  • roger nowosielski

    Not talking about getting rid of money but rather of insulating financial instruments and know-how from capitalist practice and abuses.

    I suppose it’s a doable project. Money and finance were around long before capitalism saw the light of day.

  • Anarcissie

    It’ll be rather hard to get rid of money, because we’re used to it and maybe there is no alternative, anyway. We could put it on a sounder basis, to wit, link its value to labor, but that won’t stop people from giving credit and taking on debt, and using that as a basis to leverage credit into balloons.

    As to whether everything can just grow exponentially forever, obviously in a finite world it can’t. This is a problem for capitalism because the power, wealth and social position of capitalists depend on their being leaders and organizers in a sort of perpetual economic crisis of constantly inflating scarcities. Widespread saving is defined as a problem because it means ordinary people are, so to speak, stealing the capitalists’ stock in trade. Naturally the capitalists become depressed, and then we have a depression.

  • roger nowosielski

    So yes, we’re on the same page.

  • Igor

    @84-roger: Exactly so!

    If econ is NOT placed subservient to societal goals and values it becomes subject to the whims and vices of powerful people who report to no one.

    The whole idea, Igor, it seems to me, is to try to place economy, and economic-related activities, in a proper context, as subject to more important and more overriding human concerns.

  • roger nowosielski

    Of course. But there is a conceptual connection there, Dreadful, that I’m trying to get at: trying to look at savings as a mechanism that just might make us avoid debt.

    It does work on the individual level. The question is whether it would also work for the economies of nation-states — all in the interest of relative self-sufficiency.

  • I tend to look at savings as self-imposed austerity measures with an eye to the future, a form of investment in the future.

    The best way to look at savings is not as an austerity measure. The best way is to set aside a portion of your income (whatever it is) as savings, and whatever’s left is your spending power.

    Put it straight into a separate savings account (via direct payroll deposit if possible/applicable) that you never touch or even think about except in case of a rainy day, or when you need to buy a big ticket item, or a planned major purchase. That way, you never miss it and don’t get into the mindset that you’re “doing without” in order to save.

    Of course, this only works if your income exceeds your expenses.

  • roger nowosielski

    The whole idea, Igor, it seems to me, is to try to place economy, and economic-related activities, in a proper context, as subject to more important and more overriding human concerns. Economy and the well-being of the economy should never be regarded as an end in itself, as the be all and end all, virtually guaranteeing human and societal well-being, but only as an instrumental value, subject to more important, human concerns.

  • Igor

    Roger, good point!

    Unfortunately, the current system, which tries to keep human effort (labor) stable requires that economic volume increases without end! And then that requires that rewards and punishments get more extreme. Thus, the wretched Wages Gaps, etc., that we see.

    What’s required is reduced labor, and the only way our creaky old capitalist system has to deal with that is with increased unemployment. But since we are intolerant of low financial achievement and consequent unemployment we will develop a large unemployed class. Then we will have to decide whether to pay people to be unemployed consumers (to keep economic demand going) or to shove them into the ovens.

    It’s probably better to reduce the workweek to, say, 32 hours, and increase paid timeoff to say, 5 weeks a year.

    Some countries are already doing that and it’s working well for them.

  • roger nowosielski

    Only if you regard unlimited, rather than controlled, growth as a virtue.

  • Igor

    Savings are good for individuals but bad for the economy. It’s known as “the thrift paradox”. The less people save, the more they spend (except for leakage), so the greater the “Economic Multiplier”, which is the net effect of a dollar spent after being re-cycled by other consumers.

    The Economic Multiplier is 1/(1-p), where p=Marginal Propensity to Spend, i.e., the fraction of an extra dollar of income that you spend in the marketplace where p ranges from 0 to 1. Thus if you spend 0 the Multiplier is just 1, that is, you don’t affect the economy beyond the dollar you didn’t spend. But if you spend ALL of that dollar that multiplier is (1/0), that is, infinity, and the economy explodes into a glorious technicolored orgy of spending! Of course, mostly it’s somewhere between 0 and 1.

    (Note as a corollary: the Economic Multiplier can never be zero, or even less than 1, so when some blowhard writers try to tell you that the Multiplier for some situation is zero, you know they are ignorant.).

    Savings are the bane of a vigorous economy because they detract from spending. After all it is spending and creating demand that drives any economy.

    Japan prospered after WW2 because their Champion, MacArthur, got rid of oppressive monopolies and opened American markets to Japanese imports AND suspended enforcement of US patent laws to Japanese manufacturers! Thus, the flood of Japanese copies of American products that lifted them out of the horrors of war devastation. Plus, MacArthur eliminated the Japanese war machine (promising full-scale US ‘umbrella’ protection in it’s place) thus freeing them of the dual menaces of high military expenses AND prominence of generals and other trouble-makers in the political system.

    But their high Marginal Propensity To Save undermined that prosperous economy a couple decades ago, and they’ve been suffering from inadequate demand ever since.

    Now that they can work and build like Americans they have to spend like Americans.

  • roger nowosielski


    Does it always have to come down to this kind of trade off.

    It’d seem to me that if I manage to save $100, I’ve done so at the cost of sacrificing present consumption for the one in the future. I may have valid reasons not to engage in frivolous consumption today for what I hope to realize as greater value in time to come. And if anyone is a loser, in an extended sense, it may be the manufacturer who all along had counted on my making my purchases today. If a good many people were to do that and abstain from making frivolous purchases, a message would be sent to the effect that some products are no longer as desirable as they may have been; and this would be to the good.

    I tend to look at savings as self-imposed austerity measures with an eye to the future, a form of investment in the future.

    Don’t you?

  • Glenn Contrarian

    Ana –

    Global finance is not a zero-sum game. If it were, the value of companies and overall values of the wealth of nations would never have gotten beyond what they were in the 1600’s…or beyond the shekels of Biblical times, for that matter.

    It’s not an easy concept to wrap your mind around, but perhaps this old saying fits best – “a rising tide lifts all boats”. Furthermore, unlike the physical world, except for a few temporary drops and pauses along the way, this particular tide has never stopped rising. Just something to think about….

  • Anarcissie

    If I save money, I’m saving up debts. For me to be ahead $100 at the bank, someone or something must be down $100. If I run a trade surplus someone else has to run a trade deficit. If I am Germany, someone else must be Greece.

    The alternative would be to achieve a state of consciousness in which people understood that they were part of a larger, interdependent system and that ‘no man is an island’. I don’t mean that sentimentally; it’s a practical, material consideration. But that’s not the way people choose to think and feel. If they did, they would behave differently, and we would have different and perhaps more interesting problems than the ones we currently observe, which are largely attempts by many people to practice thuggery and greed, while evading the consequences, usually by offloading the costs on other beings having less power.

  • roger nowosielski

    So the import of your #75, Ana, seems to be that “money” and “debt” are inseparable, that you can’t have one without the other. Looks like a vicious circle to me (if being in debt is a bad thing). Is that Graeber’s main point? Is there no way out?

    The reason I was pushing the savings idea — not the same as “austerity,” mind you — was in order to imagine the next-to-ideal scenario. one in which the entire business of capitalization (of projects) and financing could be put on a more conservative basis. Wasn’t that one of the reasons why the post World War II Japan became in the seventies an economic powerhouse, because of their high rate of savings?

    As to Galbraith, I think he can be excused. It was much more difficult in the seventies to imagine the limitations of liberal democracies than it is today.

  • Igor

    The bad thing about the boom/bust cycle and system instability caused by excessive positive feedback is that eventually it explodes. the cycles get more severe with larger excursions each time. Also, the pace accelerates with each cycle, it’s a shorter time between surges.

    If you’ve ever heard a motor in an unstable control system the sound is unmistakable as it starts oscillating slowly and moderately and then the pace quickens and speed changes are greater and then it explodes in a shower of sparks.

    Another is when a driver hits an icy patch and corrects too much too fast and then over-corrects the other way and so on until the disaster occurs.

    To escape the implacable onset of instability leading to destruction the designer must introduce either non-linearity (like a limiter) or non-ergodicity (like a ratchet). But you can’t leave it up to humans ordinarily because they almost always do the wrong thing. For example, in the recent JP Morgan screwup the people who were supposed to hedge the bet instead doubled down, thus increasing both their jeopardy and the exposure.

    Why did they do the wrong thing? Because human failings like vanity and greed can overcome good plans. That’s why the Nazis lost the war: a Nazi officer with vanity and power overruled the mathematicians who designed the Enigma code (on a small detail), which consequently introduced a statistical pathology that allowed Alan Turing and his gang in England to break the code.

  • 72 —

    (a) is “creation of money,” via debt, proprietary to a capitalist system?

    We observe money in non-capitalist systems. A piece of money is a promise from someone or something to give something in exchange if the money is tendered. It seems possible to envision an arrangement where money was in use which did not depend upon private ownership of the means of production and the exploitation of labor.

    (b) is “investing,” even when one “borrows” against the future, a proprietary capitalistic term?

    Not according to my definition of capitalism.

    (c) isn’t saving, and using savings to finance future projects, a form of investing, and a form of “borrowing” against the future?

    If a squirrel saves nuts in order to pursue the project of getting through the winter, I don’t see how the notion of borrowing comes in, unless the squirrel is a financier among squirrels and ‘borrows’ the nuts from some other squirrel.

    (d) does financing future projects by means of savings alone, necessarily plunge us into debt or is it a form of investment that is “debt-free”?

    If we exclude debt we exclude money, and money makes it easy to move capital and other resources around, making them more productive sooner. Since most people think more is better and sooner is better, money will be adopted and the system will be driven to its limit (and beyond).

    How does the import of your #70 differ from that of Igor’s #71?

    Igor seems to be loading the boom-bust cycle with negative value. To me, this is like looking for a casino in Las Vegas that allows one to win big but not lose big.

    74 — Galbraith, it seems to me, used the wrong term to refer to his proposal. ‘Socialism’, to me, means the ownership and control of the means of production by the workers. The control of the means of production by the government (in a large state, necessarily a remote elite) has certainly been proposed before, especially in the 20th century, but under a different name, which I will not mention lest it prove inflammatory.

  • Igor

    Here’s the blurb for Rogers citation:

    Economics and the Public Purpose is a 1973 book by Harvard economist John Kenneth Galbraith. Galbraith advocates a “new socialism” as the solution, nationalising military production and public services such as health care. He also advocates introducing disciplined wage, salary, profit and price controls on the economy to reduce inequality and restrain the power of giant corporations. Socialisation of the “unduly weak industries and unduly strong ones” together with planning for the remainder would allow the public interest to be accorded its rightful preference, argues Galbraith, over private interests. He adds that this can only be achieved when there is a new belief system that rejects the orthodoxy of economics in the past. The new socialism needs to be achieved through gradual democratic political change.

  • roger nowosielski

    cont’d Economics and the Public Purpose for new insights.

    And yes, I’m going to finish DG’s book.

  • roger nowosielski

    @63 & 70

    Help steer me through a couple of questions, Anarcissie.

    “To create money and so on — modern finance — we have to use debt no matter how earnest and sober we are.” #63

    (a) is “creation of money,” via debt, proprietary to a capitalist system?
    (b) is “investing,” even when one “borrows” against the future, a proprietary capitalistic term?
    (c) isn’t saving, and using savings to finance future projects, a form of investing, and a form of “borrowing” against the future?
    (d) does financing future projects by means of savings alone, necessarily plunge us into debt or is it a form of investment that is “debt-free”?

    How does the import of your #70 differ from that of Igor’s #71?

    Re: Michael Hudson, I’ve always regarded him as a level-headed person, considering he’s an economist. You see there a right kind of mixture of common sense thinking about economics and politics and how the two must intertwine. Remind me much of John Kenneth Galbraith. Perhaps I should re-read

  • Igor

    Bubbles, as well as the boom/bust cycle are the result of systemic instabilities in the capitalist system. Economists have known about this for over 200 years. All other systems have boom/bust cycles triggered by floods, famines, crop failures, wars, etc. Only capitalism has boom/bust cycles as a consequence of internal systemic characteristics. Excessive positive feedback is the villain: tendencies and trends are re-enforced as people pile on to a winner and have runs on losers. The system needs strong regulation to stablize. That means capital reserve requirements, inhibitory taxes, etc., and especially government counter-cyclical fiscal and monetary actions, i.e., pulling money out of the system during flush times and injecting money in bad times. That is, negative feedback.

  • Anarcissie

    Well, I’ve just explained why money leads to debt, and why it expands, creating bubbles, which eventually collapse. It looks like a system to me. I don’t see how you’re going to get out of it given present arrangements, short of a major cultural shift (anarchy and communism, back to the woods, etc.) or a totalitarian regime which would prohibit the creation of credit.

    It doesn’t matter to whom debt is owed — it is often owed to fictional beings — as long as people believe in it. And they have to if they want to keep playing the capitalist game, as they seem to.

    Depression and ‘creative destruction’, however much suffering they cause, are not blights upon capitalism; they are part of its essential nature, whether or not you sand the rough parts down with social democracy. Capitalists lay the groundwork for great fortunes during depressions. Capitalists who have done their homework and saved their pennies revel in them.

  • Igor

    @67-Dr D: I will attempt to answer your questions:

    1-WHY does the deficit need to be paid off?

    Actually, it doesn’t have to be paid off. All we have to do is make the payments. And, we have to watch out for escalating interest rates, because a lot of the debt is re-financed daily, which can cause some weird anomalies regarding long-term vs. short-term rates.

    But, eventually we will pay off all the old debt, as history indicates.

    Do you remember how strapped we all were in the 40s, 50s and 60s? Remember all the austerity programs? No, of course you don’t because even though we had HUGE debts after WW2 we had a vigorous economy driven by the baby boom and returning GIs who were NOT going to take NO for an answer. They created a HUGE demand for The American Dream, for homes, cars, TVs, etc.

    Manufacturing was totally revised from the old monopoly model to a new competitive model because FDR had socialized industry to win the war. He took over companies and ruthlessly replaced poor ones with lively competitors.

    Education was totally revised from the old privilege model to a new opportunity model.

    The economy swelled tremendously as new companies arose to satisfy the demand of the GIs as well as pent up demand from the WW2 rationing. My dad bought a new Mercury, and we tore out the old coal bin (good riddance!) and the old coal furnace that I had to stoke at 5AM to warmup the house for the family: we put in natural gas!

    Spend, spend, spend. Even though we still had the financial overhang from The war.

    And the debt got paid off! It disappeared into the wealth that was created. It was easy, in the end.

    2-What exactly are the United States’ creditors, who presumably need the United States’ business, going to do about it if it doesn’t?

    Most of the debt is money that we owe to ourselves. To US banks, mutual funds, and the SS trust fund. Only about 10-20% is owed to foreigners.

    3-After all, as Kenn is fond of reminding us, it isn’t as if this is real money. It’s not gold, it’s not even paper any more; just 1s and 0s in a computer network.

    NO money is real! Can you think of some way to make money ‘real’? I can’t, and I’ve been trying a long time. And so have a lot of economists. Actually, maybe the only way is to monetize slaves, because they have some speculative future use.

    Basically, all money is ‘fiat’ money. It has value as long as someone says it has value.

    So it comes down to that ancient and proven principle of business and society: “goodwill”. The most powerful tool in a businessmans life. When your dentist sells his ‘practice’ he is simply cashing in his goodwill so that he can retire and spend his remaining years playing golf.

    Goodwill is what keeps successful businessmen afloat. Back in the 80s when I was involved in various startups I KNEW I could use goodwill to get a loan. I remember walking into a bank office for a loan and saying “you guys know me, I’m a moneymaker. I need money for another project”. That’s because I’d always paid off everybody else before I took money out and nobody suffered from my actions. Even though the day before I had to return some extra plumbing fixtures to Home Depot to get $6 for gas.

    And that’s why the USA has always had goodwill. We ALWAYS paid our debts. It started with the revolutionary war, when it was CUSTOMARY to not pay back money to your creditors. Nobody expected the USA to pay its debts. But Alexander Hamilton fought to do things in a new way, and we established a record of ‘goodwill’ that has never failed.

    It’s un-American to propose default as John Boehner and the Republicans did a couple years ago.

  • roger nowosielski

    Probably it doesn’t need to be paid off. But deflating the artificially created value of debt would provide us with a more realistic basis as to where exactly we stand.

    It might do away with the bubbles.

  • Which does raise a fascinating question.

    WHY does the deficit need to be paid off? What exactly are the United States’ creditors, who presumably need the United States’ business, going to do about it if it doesn’t?

    After all, as Kenn is fond of reminding us, it isn’t as if this is real money. It’s not gold, it’s not even paper any more; just 1s and 0s in a computer network.

    Just asking.

  • Igor

    @63-Anarcissie; Thanks for the Hudson citation, it is well worth reading.

    Here’s a a snip from it:

    Michael Hudson

    Paul Krugman is widely appreciated for his New York Times columns criticizing Republican demands for fiscal austerity. He rightly argues that cutting back public spending will worsen the economic depression into which we are sinking. And despite his partisan Democratic Party politicking, he said from the outset in 2009 that President Obama’s modest counter-cyclical spending program was not sufficiently bold to spur recovery.

    These are the themes of his new book, End This Depression Now. In old-fashioned Keynesian style he believes that the solution to insufficient market demand is for the government to run larger budget deficits. It should start by giving revenue-sharing grants of $300 billion annually to states and localities whose budgets are being squeezed by the decline in property taxes and the general economic slowdown.

    To focus the argument against “Austerian” advocates of fiscal balance, Mr. Krugman hopes that economists will stop distracting attention by talking about what he deems not necessary. It seems not necessary to write down debts. All that is needed is to reduce interest rates on existing debts, enabling them to be carried. He does not advocate shifting taxes off labor onto property. The implication is that California can afford its Proposition #13 that has fiscally strangled the state by freezing taxes on commercial property and homes at long-ago levels. It is not necessary to change the economy’s tax shift off real estate and finance, except to restore a bit more progressive taxation.

    The effect of Mr. Krugman’s suggestions is for the government to subsidize the existing financial and tax structures, not write down debts or make the tax system more efficient. So I am afraid that his book might as well have been subtitled “How the Economy can Borrow its Way Out of Debt.” That is what budget deficits do: they add to the debt overhead.

    Mr. Krugman has gotten censorial regarding the debt issue over the last month or so. In last Friday’s New York Times column he wrote: “Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn’t the future burden of debt.” Failure to see today’s economic problem as one of debt deflation means a failure to recognize the need for debt writedowns, restructuring the banking and financial system, and shift taxes off labor back onto property, economic rent and asset-price (“capital”) gains. The effect is to defend the status quo, and to me, that makes Mr. Krugman a conservative. I see little in his logic that would oppose Rubinomics, which has remained the Democratic Party’s program under the Obama administration.

    Many of Mr. Krugman’s readers find him the leading hope of opposing even worse Republican politics. But what can be worse than the Rubinomics that Larry Summers, Tim Geithner, Rahm Emanuel and other Wall Street holdovers from the Democratic Leadership Committee have embraced?

  • Igor

    Here’s another quote from Bill Blacks interview:

    WILLIAM BLACK: … but President Obama is also, feels that he must politically say there’s a vital need to balance the budget, which is to say, to have austerity, even though he’s looked at Europe and seen that the worst possible thing you can do in a great recession, or the attempted recovery from a great recession, is to start reducing the spending and such.

    And Obama needs to go back to what he originally proposed, which was brilliant. It was a Republican idea: revenue sharing. We all knew that the states and localities, unlike the federal government, cannot run significant deficits, and that there was going to be a financial holocaust that was going to reduce vital services and throw hundreds of thousands of public workers out of work when they were most needed and exacerbate the great recession and dramatically slow the recovery. So, the recovery bill that, the stimulus bill that President Obama proposed had that provision. The Blue Dog Democrats, the conservative Democrats, and the Republicans got together to kill that. And unfortunately, the Obama administration didn’t fight for it.

    Here’s what we know. The Wall Street Journal just ran an op-ed saying, don’t allow the federal government to help the states. That tells you that’s what they’re scared of. It would be economically brilliant, it would be politically brilliant, to bring back the revenue sharing provisions, which are, after all, a Republican idea, and make the Republicans make the call that they want a financial holocaust throughout America, and they want us to slip back into a recession.

    This makes clear that the Radical Right is willing to sacrifice the best interests of the American people to their rule-or-ruin lust for power.

  • Igor

    Roger, thanks. It’s always good to read Bill Blacks analysis. He’s plainspoken, and he has experience as a financial detective, having largely been responsible for sending over 1000 bankers to jail after the S&L crisis in 1989. By contrast, we have sent zero to jail in this newer, even bigger bank scandal.

    From the citation:

    White-collar criminologist and former senior financial regulator William Black addresses the grassroots reaction to austerity measures in Europe , from the “Indignados” movement in Spain to the anti-bailout elections in France and Greece , as well as in the United States, where the Occupy movement is re-emerging as the presidential campaign gets into full gear. “Finance is supposed to simply be a middleman to help the real economy,” Black says. “It in fact now completely dominates and is a parasite on the real economy. German austerity has pushed the entire eurozone into recession and the periphery into Great Depression-level unemployment. And the same arguments are being made in the United States and are used as a pretext to try to destroy Social Security, Medicare and Medicaid. It is economically illiterate, but politically attractive.”

  • I found an article by Michael Hudson in Naked Capitalism sort of interesting because it turns out the author sort of had some ideas sort of like my own. Now, usually I prefer disagreement, but in this case it seems that few have been enlightened with this particular light, so the disagreement of everyone else will have to suffice.

    As long as he’s dumping on Krugman, he can’t be all bad. Hudson is the source of a lot of Graeber’s ideas about economics.

    Speaking of whom, I recommend taking at least a light look at the rest of DG’s book. Here’s a not totally unrelated thought: To create money and so on — modern finance — we have to use debt no matter how earnest and sober we are. But once we do this, then the next set of persons can create debts based on debts, credit given because one has received credit or perceives its ‘worthiness’ in the person or thing to which it is granted. Soon, we must have ever-widening, ever-thinning circles of credit which might be the ‘artificial value’ you’re thinking of. It’s debt and credit that loosen the asphyxiating chains of property and make life possible in spite of it, but the temptation of running a money faucet from the future is, for many (and not just dumb poor people, either) an irresistible and fatal lure.

  • roger nowosielski

    Two relevant segments from Democracy Now! today’s show:

    on austerity

    on JP Morgan

  • roger nowosielski

    Sure you’re right, Ana, but I was trying to address the possibility of finance and capitalization in a responsible fashion. We needn’t necessarily taint the world of finance by the existing capitalist practices. I should think it possible to discuss these sophisticated concepts aside from the capitalist context, don’t you think?

    Does “financing” necessarily must take the form of irresponsible extension of credit? What’s wrong with good ole fashioned loans?

    We’re talking about creating of value here, of real rather than artificial value. There certainly should be a way to discuss these matters aside from the capitalist-laden context, don’t you think? We are talking, in a sense, about investing in the future — a legitimate concern, one should think, and not necessarily proper to capitalism alone.

    On account of my personal detour, I haven’t finished Graeber’s book on debt. Are there any insights you might want to share, especially as they might relate to these questions?

  • Anarcissie

    The radical expansion of easy credit — the metaphorical printing of money — was the source of the real estate bubble. At least among capitalists, money has to go somewhere, and bubbles in equities, collectibles, real estate and commodities were, for a time, excellent sinks for the largesse. Since the crash, the government and its dummies have continue to push funny money on the rich at nearly zero interest, so we should expect a further crash in the not-too-distant future.

  • Igor

    Here’s an opinion article about the CRA and why it’s not to blame for the US financial crisis:

    Don’t Blame the Community Reinvestment Act

    Ellen Seidman

    June 26, 2009

    Homeownership rates and CRA enforcement soared in the 1990s, but sub-prime came later. CRA shouldn’t be the scapegoat for the housing meltdown.

    The mortgage crisis is far from over. Foreclosure filings in the first quarter of 2009 increased 24 percent over the already-heady 2008 levels; April filings were up 1 percent over March and 32 percent over the prior April. During 2008, foreclosure notices were filed on over 2 million properties, and banks took back more than 850,000 properties. Delinquencies continue to climb: 7.88 percent of all mortgages on one- to four-unit buildings were delinquent at the end of 2008, the highest rate on record. For sub-prime loans, the rate was 21.88 percent and almost 14 percent of sub-prime loans were in foreclosure. With home prices still falling — in March 2009 prices were down 32.2 percent from their 2006 peak — and unemployment now at 9.4 percent and still rising, it is unlikely the situation will get better any time soon.

    How did we get into this? There are a plethora of potential culprits. One was the unsustainable run-up in home prices fueled by a combination of low interest rates and often deceptive loan products that enabled homeowners to get deeper and deeper into debt with “low monthly payments” that quickly ballooned and ultimately proved unaffordable. An explosion in the international demand for high-yielding “safe” investments combined with financial engineering and overreliance on overly optimistic credit ratings created an insatiable appetite for mortgage-backed securities and the mortgages behind them, no matter how risky. Regulation was entirely missing in some cases — mortgage brokers and credit-default swaps come to mind — and lax in others. Finally, a public policy that regarded homeownership for all as the key to prosperity — combined with stagnant incomes, exploding costs for necessities such as health care and education, and lack of support for affordable rental alternatives — made it highly likely that when house prices stopped going up, millions of Americans would find themselves unable to afford their mortgage payments.

    But in the face of all these factors, some have fixed their attention instead on a formerly obscure 32-year-old statute, the Community Reinvestment Act (CRA). Echoing much of the conservative blogosphere, The Wall Street Journal in September 2008 assigned CRA blame for the ongoing crisis, albeit behind “the Federal Reserve,” “banking regulators,” and “a credit-rating oligopoly.” The election of President Barack Obama and subsequent revelations about the extent to which unregulated credit-default swaps and mortgage-backed securities backed by sub-prime loans played a pivotal role in the economic devastation, have tempered but not silenced the criticism.

    This is ridiculous. The case against fingering CRA for the destruction of the mortgage market rests on both logic and fact. Recent work by economists at the Federal Reserve Board of Governors and the Federal Reserve Bank of San Francisco provides a strong factual rebuttal, but let’s start by understanding what the Community Reinvestment Act is and isn’t.

    Read it and weep.

  • Igor


    IMO he intends that as a “distinction without a difference” as a sort of tu quoque argument.

    If everyone is guilty then no one is guilty.

  • troll

    …as the sluts rake in plenty of loot through ‘spreading em because they want to’ this seems to be something of a distinction without a difference doesn’t it?

  • Cannonshop

    #52- MMM…could it be that you don’t send additional money to the guy you already OWN, Glenn, but rather spend on buying the one whose loyalty is in doubt?

    Over the last four years, the GOP’s base has been in various shades of revolt, and there’s a hell of a lot more commonality between the non-religious grassroots in the Republicans and the moderate end of Occupy, than among many republicans and the party’s leadership.

    As for “How”, it’s simple enough-The Democrats shout against big business/corporates while taking their money hand over fist, and carrying out their legislative aims. “Whore” applies-they’re doing it for the money, not for any sort of ideological or belief, just to keep drawing in the cash.

    The GOP leaders are SLUTS for big business-that is, they spread ’em because they want to, Dems are whores for it-they only do it for the money.


  • Igor

    34-cannon: you’re going to have to explain how this works:

    “….The Republicans were feeding the growth of profits by allowing high-risk behaviours, …”

    I think we can all see how this was happening by pursuing the Reagan de-regulation mantra, but then:

    “…the Democrats were simultaneously trying to insure said high-risk behaviours while intending to tap the profits for their own political programme…”

    How does that work? I just don’t see it. How were the dems doing that?

  • Igor

    @39-Mark: You’re going to have to explain this statement because it seems to me to be exactly wrong:

    “…If Obama gets re-elected, those checks and balances are history.”

    Republican recalcitrance in the House and the SCOTUS have constantly been used to oppose Obama. The danger of losing checks and balances is greater with a Romney presidency in which case all branches would be united in one solid republican dynasty, much like the Bush presidency.

  • Igor

    50-Cannon: all the 98 amendment did was shuffle some time periods around.

    You’re going to have to explain how that caused problems.

  • Glenn Contrarian

    Hello to everyone from a McDonald’s in Cleveland, Mississippi, home of Delta State University. Yes, it is ONLY here in this McDonald’s that I can get WiFi internet access at all, for this college town has zero Starbuck’s, zero internet cafes…heck, they don’t even have a theater here! Imagine that – a college town that doesn’t even have a theater or a Starbuck’s. There’s the biggest Wal-Mart in the state and there’s a few burger joints, but only Mickey D’s has internet. Sheesh!

    Roger – that was a really good article, and you make some good points. For once I’m not too opposed to your points. Nicely done!

    Cannonshop – if the Dems are “even MORE corporate whores of Wall Street”, well, I’m not so sure about the accuracy of that statement. If you got it from this source, you’d be right…but then there’s this article by the Wall Street Journal that says otherwise. I’m inclined to take the WSJ’s word over yours…

    …which begs the question – if the Dems are “even MORE corporate whores of Wall Street”, then why is Wall Street sending more money to the GOP.

    Disclaimer – those articles are from 2011. Perhaps you’ve got later info proving your case and if so, then I’ve got more research to do. But I won’t be able to peruse this blog much until at least Friday. See y’all then….

  • Cannonshop

    Also: the debts are real, Igor, but the money to pay them back isn’t. It’s a cycle.

    Party “A” (usually republicans, but it can also-as we have seen in recent years, be Democrats) in cooperation with Wall Street loosens and/or changes the rules to allow large scale creation of fictional money. Party B (usually Democrats, sorry to tell you that) then predicates a bunch of policies on this fictional money, and spends it as if it were REAL money. (CRA, Warfare, Welfare, Corporate Subsidies, Public-Private Partnerships, what have you).

    But the money was fictional, and when the house of cards collapses (S&L crash of the eighties, 2000s Mortgage crash) Uncle Sam has all these expenses but the income isn’t there to pay them, so loans (in funny money) are taken out-the debts are real, just not the money, see?

    and the bad actors, the Neil Bushes and Keatings and such, they get a skate pass, usually from the Party that most often decries “The Rich”-that would be your lot, Igor.

    Thanks to eager, concentrated efforts of your beloved Democrats, we the taxpayers are paying the bonuses of Investment Bankers whose inability to do their jobs led to the Mortgage mess. Then again, Democrats like Barney Frank were desperately protecting mismanagement in the financial sector all along-witness his defense of the mismanaged FNMA in 2002.

    The GOP are SUPPOSED to be Corporate Whores, Igor-that’s their job. What’s disappointing is that their supposed opposition, the Democratic Party, are even MORE corporate whores of Wall street (in particular).

  • Cannonshop

    #46 I was referencing the amendment to CRA that passed in ’98, Igor, the 1977 version had no teeth.

  • roger nowosielski


    I think “finance” is an apter term when speaking of underwriting capitalization costs than “money.”

    Of course, that’s when things get tricky. Who is in charge? Who ought to be in charge? Who is running the show and for what purpose?

  • roger nowosielski

    I wasn’t arguing for socialism, Mark, only for relative autonomy of nation-states to write their own destiny rather than being dictated to by global financial interests.

    As Anarcissie remarked earlier up the thread, it’s not the Greek or the French people who had voted for loans from the IMF and the borrowing from the central banks but their governments. I totally concur.

    The Europeans have a term for those who compose their governments. They call it “the political class.” I think it’s an apt term and we should use it more often when referring to those who run “the people’s business” in our own backyard.

  • Mark Edward Manning

    Good point, Roger. But as Cannonshop noted, lazy voting has given us a class of legislators who rely too heavily on corporate interests in order to bestow themselves with more power and money. Would it were that Mr. Smith really did exist. I get your point, and it’s valid — but I have no faith that socialism is the answer. The French (and the Greeks) voted to keep spending money that they don’t have. The whole rejection of austerity measures is conveniently denying a big problem, not courage.

  • Igor

    34-Cannon: your statement is mystifying since CRA passed (1977) long before Interstate banking (1994).

    In fact, CRA has been demonstrated many times to have contributed little to our financial woes, but the rightwing constantly beats that dead horse because it absolves them and rests blame on the poor and their representatives.

    But it is simply factually wrong.

    You really don’t know much about these matters, do you?

    CRA wouldn’t have passed and been amended WITHOUT the big-(paper)Profits of Interstate banks-

  • roger nowosielski

    Merkel, the chief architect of the austerity measures, suffers defeat in her home state provisional elections:

    BBC World News.

  • roger nowosielski


    My view of “checks and balances,” Mark, is that they serve to perpetuate an illusion of democracy, a fine gloss on things, while the financial global interests are in effect running the whole show. So yes, considering the gravity of the economic crisis facing Europe and the rest of the world, I do think that decisive action on the part of the French to break the stronghold, if they have courage to do so, would be a positive development.

    Don’t forget, I close the article by speaking of an interim solution, not a permanent one. Also, it’s not exactly as though Hollande comes across as a dictator: the entire nation has spoken, and he’d be simply enacting the will of the people, just as in Greece (should an anti-Eurozone coalition be formed).

  • It’s a difficult challenge to balance budgets and deliver social services simultaneously.

  • Anarcissie

    It’s somewhat contradictory to present Obama as at once dictatorial and indecisive, incompetent and all too masterful. In fact he is now as he has always been, cautious, conservative, mainstream, a dutiful agent of the ruling class.

    In any case the style of the figurehead doesn’t matter much. I don’t see any major differences between the policies of the present administration and those of its immediate predecessors, nor would I expect any, given the facts of power in the U.S. These will evidently not change until they develop into some sort of catastrophe.

    Looking on from some distance, I expect things are much the same in Europe.

  • Mark Edward Manning

    Cannonshop, I know this much: Incompetent voters were responsible for an incompetent president taking office in January 2009. I can only hope they’re just competent enough to have learned their lessons. We get the gov’t we vote for. You are right, though, in that Congress is abrogating its duty (so it would seem) to stand up to the Executive branch. There is no “Mr. Smith Goes to Washington” — that guy is a myth and always was. But we still have to be careful with our Legislators as well as our President. On that point, I agree with you. But I would like a true President who people can be free to criticize and who isn’t so thin-skinned that he goes on the warpath against anyone who does so. I do not want a Dear Leader figure. And I feel that what we’ve currently got.

  • Cannonshop

    #39 No, Mark, you are wrong. Obama is no more a threat to the system of checks and balances, than Buchanan, Grant, Wilson, FDR, Truman, Johnson, Nixon, Ford, Carter, Reagan, Clinton or the Bushes.

    The threat comes from when those tasked with carrying out those checks and balances, i.e. Congress and the Senate, in specific, don’t do their due diligence and duty in limiting the powers exercised by the Executive.

    The failure to act in the Legislative branch (and the Judiciary) in limiting the powers of the Executive Branch, is not the result of any particular charisma or corruption in the hands of the specific chief of the Executive branch-their failures are, frankly, OUR failures, as voters. If we permit inactive or partisan support in the Legislative, if we allow sycophancy, sloth, inattentiveness, or ignorance, it is because we have failed ourselves, not because a single man (no matter how charismatic he may be) was re-elected.

    In other words, get a grip, Mark, focus on the elections that matter-our nation can survive incompetent presidents, what it may well not survive, is incompetent voters.

  • Mark Edward Manning

    If Hollande is the modern-day Napoleon, you obviously approve, Roger. Your dismissal of the checks and balances of the American political system, as defined by the Constitution, removes any doubt as to your thrist for a supreme leader. Fear not, though: If Obama gets re-elected, those checks and balances are history.

  • Anarcissie

    It depends on what you mean by ‘capital’, ‘capitalism’, and ‘money’. If by ‘capitalism’ we refer to a configuration of the state involving the private ownership of the means of production and the exploitation of labor, and by ‘capital’ to stuff used to make or increase the utility of other stuff, then of course any tool is capital and capitalism is not required.

    The definition of ‘money’ is trickier than that of ‘capital’ — for instance, credit in all its multifarious and mystical forms in ‘money’. I am pretty sure there could be noncapitalist money for most senses of the word.

  • Anarcissie

    Depends what you mean by ‘capital’ and (or) ‘money’. If by the former you mean something like ‘stuff used to make other stuff’, and by the latter, ‘symbolic medium of value exchange’, I would think not.

  • And possibly its origins.

  • From the Oxford Dictionary of Politics: capitalism

    That link gives three contemporary uses of the word capitalism and their origins. Only one definition does not discount what I think is the most salient aspect–that is, the relationship between people. And that is number 3, Marx’s view.

    I think discounting the social relationship precludes the ability to clearly assess capitalism’s effects.

  • Cannonshop

    #28 but Igor, CRA wouldn’t have passed and been amended WITHOUT the big-(paper)Profits of Interstate banks-without the bad reporting going on, there wouldn’t have been the false belief in Congress that it wouldn’t have an impact-because there wouldn’t have been the false and misleading idea of a huge pool of money waiting to be tapped for “Social good” (i.e. vote-buying).

    See, you’re treating these as distinct, separate, and unrelated items instead of components of the same unified whole. CRA made things Worse, but it wasn’t the origin of the problem.

    The origin of the problem was Keynesian stimulus from the right, in the form of Deregulation, combined with Keynesian stimulation from the Left, in the form of special exemptions and protections from market forces (i.e. an FDIC with no stated limitations, and no requirement to comply with reasonable regulations, also the urge to allow/encourage centralization of resources. Big Business as brought to us through banking by Big Government).

    The Republicans were feeding the growth of profits by allowing high-risk behaviours, the Democrats were simultaneously trying to insure said high-risk behaviours while intending to tap the profits for their own political programme-both sides got burned (though both needed to be burned a LOT more) when it turned out that neither of them understood what they were screwing with-and fingers are pointed, but it was a bipartisan effort and nobody’s free of blame.

  • roger nowosielski

    Yes, but the ownership of the means of production is the crux of the matter.

  • Igor

    Technically, ‘capital’ is defined as “means of production”, i.e., factories, machines, trucks, etc. The common measure is dollar value.

  • Igor

    @30- Credit Unions are very good. So are local banks, altho Big Bank Acquaintances constantly warn against small bank instability. The old state banks seemed to work well, and damage was confined.

  • roger nowosielski

    What’s wrong with community-owned banks, Igor? Do you have anything against such a preposterous idea?

  • roger nowosielski

    @ 27

    No, it doesn’t. No one was better at organizing resources that the Nazis — whether it came to building up the war machine prior to World War II or making the most efficient use of labor camps while the war was on.

    So I guess we’re dealing here with different conceptions as to what “capitalism” means.

  • Igor

    Banks should be restricted to their charter states and inter-state banking prohibited, as it was until a few years ago. That prevented overgrown monopoly banks such as the modern BofA.

    Interstate banking is far more responsible for todays problems than the CRA.

    Margin and reserve requirements have to enforced. Modern bankers usually run on a reserve these days of a mere 3% as a consequence of all the breaks that they get. 10% has a better history.

    We also need to send crooked bankers to jail. After the S&L banking crisis in the late 80s we sent over a thousand bankers to jail. but now they’ve started violating laws with impunity. Nobody has been sent to jail.

  • STM

    Depends Cindy. What came first, the chicken or the egg, and how long’s a piece of string?

    Once capital, or money, starts to be organised, it starts to fall in the bracket of capitalism.

    For instance, were the Soviets engaging in capitalism when they bought their sugar from Cuba and paid for it with cash to prop up the Cuban regime, and other commodities – such as weaponry.

    So the answer is yes, no, possibly, and who the f.ck knows …

  • roger nowosielski


    Exactly, Cindy, A neutral (not loaded) rendition of “capital” is simply resources – human, material and otherwise. And mobilization of such resources certainly isn’t predicated by capitalism as being the only operative system.

  • I probably should have said ‘organization of money’ instead of capital.

  • Does “organization of capital” require capitalism?

  • Cannonshop

    #17 Igor, many if not most of those regulations were there to RESTRICT credit, to dis-encourage spending in excess of one’s ability to (eventually) pay the bills racked up.

    Unfortunately, yes, we do need actual REGULATIONS-which is different from government rent-seeking, and different from government choosing who gets easier access based on political, as opposed to economic, criteria.

    The S&L crisis, and the crisis of the last decade, both happened as direct results of eliminating things like reserve requirements, laws ‘encouraging’ banks and S&L’s to lend to credit-unworthy persons for political reasons, and SEC validation of instruments that the designers of said instruments did not understand the workings of.

    Carter deregulated the Savings and Loan industry, and for almost a decade it ran red hot, then broke down (which it would do in such a situation).

    We DO need regulations on banking institutions-that is, fixed rules that all must comply with EQUALLY, and rules blind to any factor in lending save a particular debtor (or potential debtor)’s ability to pay back the loan, reserve requirements because beyond a specific point, lending is a gamble, and depositors need to be protected-not by a government insurance programme (’cause Uncle Sam’s out of cash) but protection from irresponsible money-managers who went to the same business schools that turned out the illiterates in congress.

    Regulation, like Taxation, needs to be ‘goldiloxed’ to where it performs its function, without either strangling production, or being so light that it fails its function.

    Function is where it’s at, Igor-the regulations must be simple enough to enforce, while being effective at their primary task-which is to keep the economy stable and productive by maintaining a uniform environment with solid rules…and no exceptions. That last bit is the killer, and the reason why many people wind up opposing regulations to begin with-the exemptions and exceptions, mostly politically motivated, make the regulations a joke.

  • Igor

    Some organization of money (capital) is also required.

    In the meantime we should start putting bigtime criminals like Jamie Dimond away in secure jails where they are prevented from stealing other peoples money.

  • roger nowosielski

    You’re confusing capitalism with mobilization of production. Production can and has been mobilized along non-capitalist lines.

  • Igor

    Capitalism will not disappear, but it can be reduced to less important functions. It’s good for making light-bulbs and other commodities but it’s no good for giant enterprises and monopolies. It’s too dangerous.

  • roger nowosielski

    Well, this kind of facing up to, of being so compelled, is kinda scary, isn’t it?

    It would take nothing less than taking full responsibility for one’s future, in an Ayn Rand’s, though non-perverse, kind of sense,

  • Anarcissie

    It seems to me that the crumbling of capitalism is inevitable, and I derive hope from that perception. (Imagine if everything were hunky-dory!) I concede it is a dangerous situation. The last time ‘man [was] at last compelled to face with sober senses his real condition of life and his relations with his kind’ man didn’t do very well.

  • Igor

    @15-Cannon: Except that there are many credit economies that have not failed.

    So you can’t say ‘always’. I’m not even sure you can say ‘often’.

    The USA credit economy survived for decades until the de-regulation mania took hold. It took regulation to make it work, so it fails when you de-regulate.

    Bring back financial regulation!

    Government regulation isn’t a problem, it’s the solution to financial problems.

    Haven’t we all learned that by now? From bitter experience?

  • roger nowosielski

    Ana, understand that I’m looking for a silver lining here. There’s so little hope to derive from the everyday business of global politics, politics as usual, that one almost has to grasp at straws.

    I still contend that it is possible to try to divorce the functioning of local, even national economies, from the kind of stronghold that’s being enforced at present by IMF and international finance, and the French experiment presents a perfect opportunity to do precisely that — to drive in a wedge.

    I don’t suggest it would solve all the problems, because financial capitalism is only one part of the problem. But I contend that rendering financial capitalism superfluous, to say the least. would count for something.

  • Cannonshop

    #11 Except that credit-card economies always fail, Igor-because your economy doesn’t (in practice) keep growing at a rate faster than your interest payments-which is why we had the crisis in 2007/08/09/10, why the S&L crisis happened in the eighties, etc. etc. etc.

    If your production (that’d be your production of REAL wealth and assets, as opposed to paper wealth) doesn’t keep up with your spending, you can ‘stimulate’ enough to hide the pain for a while-think of it as using Morphine to hide the pain of an injury-but in the end, the bills (And interest) come due.

    They ALWAYS come due.

  • Anarcissie

    Actually, it’s the Greek government, under the direction of its ruling class, that borrowed money, not ‘the Greeks’ or ‘Greece’. An important part of high finance is elaborate obfuscation which makes it difficult for non-specialists to have the slightest idea what’s going on. The people in general may be faulted for consenting to this arrangement, but otherwise its details are not in their hands. There is a certain theatricality to what is going on, although the suffering of the people is, as usual, real enough, and is certainly undeserved — check the average hours worked per employed Greek as compared to those of other Eurozone states. A Calvinist interpretation is not only wrong (in more than one way), it is silly.

  • Igor

    The risk that twits take when they lend more than the borrower can pay is that they might get stiffed.

    So, what’s the problem?

    Especially if Greece stiffs Goldman-Sachs, as deserving a bunch of twits as can be found. Or Morgan Stanley, whose Maximum Leader Jamie Dimond just blew $2billion on bad bets and expects the FDIC to bail him out (thanks to ending Glass-Steagal, now people who thought their money was in a safe low-interest savings account can pay for Jamies joyrides; hello, suckers!).

  • Igor, STM’s (for that is the true(ish) identity of “Golden Boots”) full remark was “don’t spend more than you earn, and don’t borrow if you can’t pay it back“.

    It’s true that many of the combatants in WWII borrowed money to finance the war effort. The United Kingdom only finished paying back its war debt to the United States about five years ago. But it was paid back.

    In contrast, it does look as if Greece and a couple of other Eurozone nations borrowed knowing that they couldn’t pay the money back. And as if some twit lent it to them knowing the exact same thing.

  • Igor

    @8-golden: It’s amazing that you repeat this bogus homily:

    “…basics of goodn housekeeping: don’t spend more than earn,…”

    The USA was built in defiance of that notion by people who bought houses, cars, washing machines, TVs, etc., on time payments that indebted them to much more than they could pay off.

    In fact, the US revolution was financed by big loans from Europeans, as was the US half of the Civil War (Confederate lenders were stiffed).

    WW2 was fought on borrowed money. The post war boom was financed by home loans and household loans.

    Where do you get such strange ideas?

  • Anarcissie

    The point of austerity is to induce depression, thereby disciplining the lower classes. But I don’t understand its application outside capitalism.

    In any case, I think both the lower and higher classes agree on certain general principles, although their interests and methods differ: 1. keep your stuff; 2. get more stuff; 3. as fast as possible. Now, if you drive a vehicle as fast as possible, you will run off the road quite often. In capitalism, the ruling class drives the economy as fast as possible, with the broad approbation of the ruled, especially through the inflation of equities, debts and entitlements, so it is quite popular except during the running-off-the-road events. I don’t see what Hollande is going to change in terms of the basics, because mostly what he has been asked to do is not be Sarkozy, certainly a sensible request but hardly a radical one.

    The fact that the Holy Roman Empire of the German Nation has been able to impose austerity deliberately and overtly is interesting in terms of political technique; inflation is the usual way of stealing from the working class, and depressions are just supposed to mysteriously happen to happen when some extra creative destruction is needed. But as I said I don’t think I understand the Euro zone.

  • STM

    Reassuringly large, that is …

  • Golden Boots

    Ana: “I guess I don’t understand the Euro zone.”

    Join the club; no one understands the eurozone – including the eurozone itself.

    Some of the countries in southern Europe forgot the basics of goodn housekeeping: don’t spend more than earn, and don’t borrowm if you can’t pay it back.

    Now let’s see those profligate Frenchies go down the same track.

    It’s a worry … seriously, it really is.

    Here we are, on the cusp of a global recovery, and the froggies elect a socialist president bent on spending more government money.

    Who’d a thunk?

    If Europe goes down the pan, watch everyuone else go down the gurgler with it.

    I bet the Poms are quite glad they kept the pound as a separate currency right about now. They must be standing on the white cliffs of Dover, looking across the channel at the seething continent, and wondering: “Modern-day Napoleon? Let’s hope not”.

    Once again, a small body of water probably never felt so large.

  • Igor

    Righto, Roger. Austerity just makes a depression even more depressed. It’s ‘pro-cyclical’ reinforcement: the bane of any economy.

  • roger nowosielski

    Thanks, Igor.

    I don’t think it’s so much a question of a test, Dreadful, as to which what set of policies are most likely to work. I take it as axiomatic that implementing austerity measures without paying attention to real growth is bound to fail.

    The real question, I take it, is whether global and local economies can take off on their own without interference from, and control by, global financial interests.

    My bet is that they can.

  • roger nowosielski

    U don’t think I was saying that, Ana. My argument is that France is an excellent position to break the stronghold.

  • Anarcissie

    The banks have given up control? I guess I don’t understand the Euro zone.

  • Igor

    IMO, the USA has relinquished world leadership in civic affairs and there is a big opening for just such a move by another country.

  • As non-Anglo-Saxon as the French (and most of the European) economy may be, the election of Hollande does promise to provide us with a “test case” for the argument as to whether austerity or stimulus is the best way out of a monetary morass.

    France is a major player in the sense that it, together with Germany, is the de facto leader of the EU, one of the world’s most influential economic blocs. This should be interesting. While I don’t think Hollande (who is not really a socialist but a social democrat) can deliver all that he promises, and the stars in the eyes of French voters will probably fade fairly quickly, France has surprised us before.

  • Igor

    Good article, Roger. Very thought provoking.