Posts Tagged ‘Great recession’

Depression’s Causes: Righteousness & Viciousness

October 14, 2014

TODAY’S GREATER DEPRESSION HAS MANY DEEP CAUSES

Slowly rising consensus: in some important ways (evolution of relative GDP; employment rate; public investment; education’s relative performance), the economies of the leading countries are doing worse than during the “Great Depression” of the 1930s.

That’s why I prefer the expression “Greater Depression” to “Great Recession”.

And we have seen nothing yet: the cause of the “Greater Depression” of the 1930s was a chain of errors, which were easy to avoid.

(First a splurging in the 1920s, especially in the USA and Britain, and its unavoidable attending crash compounded by the American Senate’s arrogance that the international economy could be tweaked through tariffs, to profit only the USA, the whole thing followed by collapse of international trade and then by “liquidating everything” (as was said at the time).)

Thus, the roots of Depression of the 1930s were shallow, easy to avoid next time: avoid splurging, keep international trade going, use public money to avoid 9,000 bank failures (in the USA alone), and institute a FDIC (Federal Deposit Insurance Corporation: Europe’s “Banking Union” is trying to mimic that).

There are serious problems now, much more serious than in the 1930s. Including a lack of seriousness.

Serious reasons for collapse caused the long decline of the Roman Empire, or struck shortly after 1300 CE, when entangled ecological, climate, demographic, and plutocratic crises, with an attending plague, combined to kill half of Europe, and brought five centuries of war.

Indications are that the world economy, having not really recovered from the 2008 crisis, is stumbling. Especially Europe. Population: more than 750 million (EU + Russia, etc.).

Why? Why not?

In the 1930s, the government of the USA, first under Hoover, and then much more spectacularly under Roosevelt, starting in 1933, made Herculean efforts (in public spending, and legislation). Nowadays, it’s quite the opposite.

Paul Krugman suggests that righteousness is the cause of this decline: see the obstinate Merkel, and the refusal to do away with high debt levels.

In “Revenge of the Unforgiven. How Righteousness Killed the World Economy”, Krugman observes that:”…now [world] growth is stalling, and the specter of deflation looms.

If this story sounds familiar, it should; it has played out repeatedly since 2008. As in previous episodes, the worst news is coming from Europe, but this time there is also a clear slowdown in emerging markets — and there are even warning signs in the United States, despite pretty good job growth at the moment.

Why does this keep happening? After all, the events that brought on the Great Recession — the housing bust, the banking crisis — took place a long time ago. Why can’t we escape their legacy?

The proximate answer lies in a series of policy mistakes: Austerity when economies needed stimulus, paranoia about inflation when the real risk is deflation, and so on. But why do governments keep making these mistakes? In particular, why do they keep making the same mistakes, year after year?

The answer, I’d suggest, is an excess of virtue. Righteousness is killing the world economy.”

Notice that brandishing righteousness diverts attention away from full blown viciousness (which I believe is dominant). Then Krugman presents a small fraction of the problem, affecting to believe naively that high debt is the cause of everything:

“What, after all, is our fundamental economic problem? A simplified but broadly correct account of what went wrong goes like this: In the years leading up to the Great Recession, we had an explosion of credit (mainly to the private sector). Old notions of prudence, for both lenders and borrowers, were cast aside; debt levels that would once have been considered deeply unsound became the norm.

Then the music stopped, the money stopped flowing, and everyone began trying to “deleverage,” to reduce the level of debt. For each individual, this was prudent. But my spending is your income and your spending is my income, so when everyone tries to pay down debt at the same time, you get a depressed economy.

So what can be done? Historically, the solution to high levels of debt has often involved writing off and forgiving much of that debt.”

This is a solution I have advocated since 2008. See “Reforming World Finance”, from November 2008, when I naively still hoped my friend Obama would grab the bull by the horns, as if he were courageous, or something. None of these obvious reforms was implemented, but at least now an economy Nobel was given roughly in this direction (see yesterday’s essay).

The 2011 version is: “To Save The World, Please Default (And Grab Capital From the Conniving Plutocrats)

Iceland and Greece did write-off some debt. They had no choice.

However, debt forgiveness is only part of the problem (Oh, by the way, full disclosure: I have zero debt, so if I were biased, it would be the other way!)

The nature of the old debt, and the nature of the new debt are the core problems.

Debt because housing prices are through the roof comes from lack of building. Debt because of enormous leverage by public-private banks and companies involved in financial horror to steal We The People, is still something else.

The erroneous nature of the debt has misaligned the entire economy. We live in a world where there are master sommeliers. And where millions of people are tickled pink by the idea of being waited by a master sommelier, somebody who can look through a bottle thanks to the light of a candle, he expertly lighted, to stop exactly before the deposit at the bottom gets into the clear wine.

But then there was not enough money, or interest, to invent an ebola vaccine. Civilization is drunk, Bacchus is god, and Death invited to the party.

The entire debt machinery is stuck. Banks have lent to financial conspirators for decades, and are still doing it ever more. This sort of debt ought not to exist. (Bankers have been conspiring to steal on the currency markets, the administration of the USA claims to have just discovered, hinting that this time some bankers may be prosecuted personally. Maybe. Perhaps. We will see… But that sort of outright criminal activity is different from stealing by giving money only to one’s friends and co-conspirators.) What is needed for civilization to survive, is debt that brings new high Return On Investment for We The People. That could be new tech, or new housing, new, sustainable energy sources (my eye being on thermonuclear fusion, a field where power is growing according to its own “Moore Law”, that means, exponentially; to provide clean BASE energy). Plutocracy naturally is not interested by We The People flourishing. Just the opposite: Pluto thrives on misery. That’s the part of the economy which no one very serious, and part of the oligarchy, wants to see.

Even normal people do not want to see it: it’s too depressing, and they don’t know what to do.

Moreover plutocracy is entangled with a more far-out explanation of the present economic distress: the world is getting old, as the Romans used to say. The Romans needed to transit from the old economy, to a new one. As we do. Paralyzed, mesmerized and occupied by plutocracy, the Romans could not even conceive of the notion (all the more as some zones of the empire, especially in the Orient saw their GDP climbing all the way until the barbarians invaded, archeology shows). Roman mines got exhausted, regions which used to produce lots of food became poor, Return on Investment of many activities collapsed,. there were not enough slaves, nor small farmers to support production, or the army, the economy and security organized until then by the state faltered, from too small tax revenues, and finally the middle class and local government (the “curiales”) were destroyed by taxation, while plutocrats went on a rampage, grabbing most powers. Romans had to make transitions (new tech, no more slavery, less plutocracy!) They didn’t. We are in a similar crisis. ROI is collapsing, so is the biosphere. Robots are threatening to destroy much employment all together. The notion of productive activity, thus productive debt, has to change, forgiven or not.

Krugman himself concludes that the debt crisis will not abate. He does not say why. I will: it’s not just out of mental inertia, it’s out of viciousness.

Some will say I exaggerate. Not so. Look at Italy. The government debt is around 145% of GDP, and pays more than 3% interest. So it augments at the clip of around 5.5% a year. To diminish that debt, nominal Italian GDP ought to grow at more than 5.5% a year. But guess what? Not only is Italy not growing, but Italian GDP is smaller now than 14 years ago (with a larger population).

There is only one way out: default. That is tell the plutocrats that they can forget their money, or, more exactly, treating We The People as if we were indentured servants, or serfs. I rest my case.

Patrice Ayme’

Too Big To Fault, Say The Immoralists.

December 4, 2009

 

NOT YOUR GARDEN VARIETY DEPRESSION.

In a nutshell: the present crisis consists in a whole succession of crises imbricated like Russian dolls within each other, when they are not entangled in even more complex ways. Many of these crises are much graver than in those in the 1930s, because they belong to the philosophical, or very deep psychological, realms .

An advantage we have, though, is that we know how bad it went in the 1930s, and that the application of more brainpower and solidarity would have allowed us to go through, then… except for the problem there was with the basic mentality of all too many Germans, who, at the time, thought that war was a panacea… of course no such thing would happen again now that the USA, the dominant military power (just as Germany used to be the dominant military power), is led by a Nobel Prize.

The USA could start pulling out of its dive by acknowledging that American institutions and American individuals are not to big to fail, and are not too big to fault, and acting accordingly. That would be a significant difference with the Germany that flew into WWII as a butterfly of hubris into the flame of civilizational collapse.

***

The present crisis is way worse than just a financial crisis, such as the Great Depression of the 1930s. Even during that one, the median income over a period of, say, twenty years, always went up. But this is not the case now: the average real median income in the last 20 years has been, at best, stagnant, in the USA.

On top of the financial crisis, there is now a serious economic crisis. It is caused by several factors: the so called "globalization", caused by average developing country workers doing the same work at a very small percentage of the salary of the developed country workers, is part of it; another part is the collapse of lending, the usual problem in a big financial crisis. Nationalizing the management of the banks would have insured lending to the real economy, but, instead, the Obama administration used nationalization instead as a gift to the entire oligarchy which caused the crisis, thus comforting them in the errors of their ways.

On top of the economic crisis, there is such a deep corruption crisis that it has become a cognitive crisis.

Indeed, instead of calling bankers, "banksters", as F. D. Roosevelt did, Obama embraced them, calling Jamie Dimon, head of JP Morgan "my friend" and professing his admiration. Then Obama went on to make derogatory, nationalistic, hubristic declarations on the Swedish bank sector, celebrating the superiority of the American one, thus demonstrating no conceptual awareness.

This all the more remarkable that the bankers Roosevelt accused to be “banksters” were not the prime causal agents of the Great Depression of the 1930s. Instead, the crisis of 2008 was entirely caused by the bankers. Thus the 2008 bankers deserve much more than the 1933 bankers the title of “banksters”. And what do we observe?

Obama’s chief of staff got more than a 16 million dollar bribe in two years, between stints in various public-private banks. Summers and Geithner were on formidable payrolls of various financial conspiracies for years (Congressman Ron Paul and Al. want the Fed to reveal what it has been plotting about, year in, year out, and with whom).

On top of the economic crisis there are energy crisis and a CO2 crisis, entangled with it, which put the biosphere at bay. The encroaching water crisis is part of the energy crisis (a lot of energy could allow to desalinate and transport).

Finally there is a scientific and value crisis. We need more rationality to get out of all the crises, but all what the "Nobel Peace Prize" can propose, is the eternal peace of killing all his enemies, real or imagined, plus untold numbers of completely innocent people.

And "Nobel Eternal Peace Prize" kills people with robots, in video games, at a distance, without even bothering with any semblance of due process. "We kill who we please, therefore we work for peace" seems the new modus operandi of the USA.

In other words, we are observing a moral crisis, the total collapse of the most basic legal and moral orders, breaking through various moral floors that even the Nazis did not dare break through, officially speaking.

Some will scoff, others will scream: the Nazis did worse, they will gloat, in their naivety. Sure, they did worse, at the end of their tether. The Nazis cycled through: they had to swallow their own poison, they collapsed with the holocaust they had organized for themselves. The Nazis went criminally insane, because they were losing the war, and they had been losing the war all along. Hitler confided this to Goebbels, as early as before attacking the USSR. The Fuhrer said to his propaganda minister, that they had already committed so many crimes, they were condemned to win, or die.

All along, the Nazis, even Hitler himself, pretty much knew that it was curtains for them after France, Great Britain and their enormous empires, Commonwealths and influences, declared war on September 3, 1939. Hence their weird, hyper criminal rage, as early as 1939 (they bombed flour mills in Poland before winter, so that the Poles would starve to death).

The Nazis were despaired all the way down their ranks. Even, as they looked at the height of their glory, vanquishing France in May 1940, Nazi engineers had to resort to suicide charges, carrying high explosives on their backs, Jihad style, to break through fortifications held by a second rate French reserve division (the Nazi armor, army and air force were concentrating on this point of the front, and they had to break through, or die, because there was no coming back through one narrow Ardennes road, while losing hundreds of planes, as only a fraction of the French and British air forces had been engaged yet).

So the Nazis were desperate, all along; they knew they would lose the war, and their hatred was the only thing that could grow without bounds. Thus, what the Nazis did secretly in their despair, the holocaust, is another matter entirely, from the further moral collapse of killing arbitrarily for all to see, with obvious immoral arrogance. The crucial point about the Nazi extermination: it was secret.

U.S. terminator robots manned by underlings of "Eternal Peace" guy is an official extermination program all too many Americans approve, whether they like it or not, as they morally collapse down the black hole that is engulfing their decaying civilization.

If one compares with the early 1930s, one sees that the problem then, was that enough Germans had understood nothing about the philosophical shortcomings and errors of their society. That guaranteed a disaster. For reasons I will not get into here, the basic fascist attitude of Germany led, or pushed the USSR, Italy, Spain, Japan, and many other countries into somewhat similar fascisms, either by direct impulse, or reaction (the later, in the case of Stalin).

Right now, it’s the USA and its long encouraged killer boy, Muslim fundamentalism, which don’t get it. The fact that they fight each other is no encouragement: Stalin justified his ways, killing millions of Soviet citizens, to his colleagues, by what he saw as the future, coming extermination war with Germany (as it turned out, Stalin was right, in more ways than one!) Stalin even allied himself with German fascism, for tactical advantage (although not as long as Qaeda was allied with Washington).

Some Americans may scoff, seeing no Soviet Union for them to invade, but that is to forget that the Bush’s government financed the Pakistani thermonuclear bombs, AND that it will not take many Islamist bombs exploding in the USA to incite the USA to verse into total fascism, even at home, as a remedy…

So there is a lot of work to do, just to conserve the world, and the peace we have now, and we are not heading that way, as the deference with whom the financiers and their perverse tools (derivatives) have been treated as "Too Big To FAULT".

Patrice Ayme.

https://patriceayme.wordpress.com/

***

P/S: it will not escape the astute that German real median income had not gone up for 20 years, as Hitler rolled in…


Artificial Turf At French Bilingual School Berkeley

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www.grrrgraphics.com

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because all (Western) philosophy consists of a series of footnotes to Plato

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Smile! You’re at the best WordPress.com site ever

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www.grrrgraphics.com

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because all (Western) philosophy consists of a series of footnotes to Plato

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Striving For The Best Thinking Possible. Morality Needs Intelligence As Will Needs Mind. Intelligence Is Humanism.

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Dogs are animals of integrity. We have much to learn from them.

ianmillerblog

Smile! You’re at the best WordPress.com site ever

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