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18 April 2016

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charly

South Korea was seriously third world & socialist and Belgium or Germany aren't exactly homogenous

MRW

In that case many corporations would be in the position I just described: able to milk their businesses for cash, but with little reason to spend money on expanding capacity or improving service.

Where has Krugman been? This has been going on since 1980 when compensation and bonuses for execs was now based on the value of the shares, the vaunted ’shareholder value'. It’s called taking a public company private. The value of shares rise when that happens and middle management and above get monster bonuses while the workerbee gets the shaft.

Another trick was using excess cash, not for product development or breaking into new markets--why take the risk?--but instead to invest in derivatives and other financial instruments and raise the share value that way. Queue the bonuses.

As economics historian Michael Hudson describes it, finance capitalism replaced industrial capitalism. It started with Reagan, but Clinton put the institutional infrastructure in to make it all happen. (Current Treasury Secretary Jack Lew was one of Clinton’s architects.) People vote for Clinton at their peril.

different clue

Doug,

Over the coming decades you describe, where super artificially-intelligent automation mass-slaughters tens of millions of jobs; what happens to the tens of millions of people who lose their jobs and have no other jobs in existence to go find and get?

How does a society which has always believed people must earn their daily bread cope with tens of millions of its members having no access to any way to earn any bread at all because the robots are earning all the bread now?

different clue

Will Reks,

The people who hope to live long enough to collect Social Security and Medicare are the people who have been paying FICA and Medicare taxes their whole working lives on the understanding that they would receive Social Security and Medicare when they couldn't work so effectively any more. I wonder if a large number of non-rich non-white FICA/MCare Tax Payers are also secretly planning to vote for Trump on the strength of that promise and just don't want to say so in public.

Babak Makkinejad

Yes, it began in late 1970s when Finance Capital, instead of a Hand-Maiden to Production, became its Mistress.

I suppose the leaders of the United States, in both politics and economics, had envisioned the United States to become the Financial Center of the World - manufacturing production be damned.

But likely London is going to claim that prize.

Will Reks

Yep.. people love socialism as long as it benefits them.

Will Reks

Maybe, but its to early to say. Protecting SS and Medicare while bringing back jobs is popular with the working class, regardless of race.

Tyler

Mark,

I have no clue how you came to that conclusion, moon man. What color is the sky in your world?

Tyler

Charly,

You're splitting hairs here and we all know it. SK "was". Belgium is the center of NATO and the EU, but about to go under sharia. Germany is running on EU fumes and also about to go under shariah. Both countries are borrowing money to pay the dhimmi tax of welfare.

Tyler

Elkern,

Now young people are terrified of being called "islamophobes" "racist" or "homophobe".

The real counter culture is on /pol/ by the new generation of reactionaries.

readerOfTeaLeaves

Gregg seems to have been a political careerist who mistook money for prosperity.
I'm inclined to the more recently articulated views that prosperity comes from 'solving problems'.

We are living at a time of momentous shifts in economic thinking -- extraordinary times, indeed.

Senator Sanders has evidently immersed himself in much of this newer economic thinking, as evidenced by his selection of Univ of Missouri at Kansas City's (UMKC) Prof Stephanie Kelton as his head economic advisor back in 2015. Although Judd Gregg is oblivious, there is currently a ferment in economic thinking, partly because databases now make it easier to get better analysis (think Piketty), and partly because it is easier for people around the world to engage in economic conversations and exchange data sets.

The model of economics that Judd Gregg expresses is based on fluid dynamics and the physics of the 1890s: closed system, inputs, outputs, humanity stripped out of all economic behavior (ergo, no need for moral conversations). This kind of thinking has shaped the US tax code, and leads to economic cannibalism of the 'stock buyback' variety that MRW so eloquently scorns.

Sanders' thinking appears to be grounded in his personal experience, but he appears to be somewhat quirky in his mastery of economic theory and economic data. (The same could be said of Elizabeth Warren.)

Anyone curious about new shifts in economic thinking would find this a good starting point; one of the authors is a multimillionaire weary of bad business models and the social havoc they wreak:
http://democracyjournal.org/magazine/31/capitalism-redefined/

I'd also 'second' MRW's Wall Street on Parade links -- the Martens are former Wall Streeters, and fearless about what they write. Michael Hudson comes at economics from a depth of knowledge about ancient economies, so he has fewer blinders and less ideology than the Judd Greggs who inadvertently wreak so much havoc.

I'm definitely in agreement with MRW's views about voting for Hillary: support her at your peril. If you want someone who does not fundamentally question dangerous, outdated assumptions, she's your candidate.

drpuck

Thank you Mr. Sale.

(My sense.) Socialism is a broad label, and it covers the various socialisms, most of which represent hybrid experiments at integrating economics at the level of a country with the larger economic context the country is embedded within. In my opinion, this makes the broad brush framing (and smacking down,) unhelpful.

Socialized approaches to economic management are historically related to communalism, tribalism, and the various local structures for informally, in a sense, "insuring" welfare at the scale of extended families, kin groups, and other scales of local identity. Such structures might be viewed as proto-socialisms, and these follow from a shared ethic, something like, "we're in this together." After all, once hunter-gatherers, we are social animals.

Are there contemporary examples, where there is high unemployment, not much of a welfare state, but hardly any starvation?

(There is very little reason "left or right" ideological propositions should be expected to be well fit to the task of guiding dynamic economies able to sustain benefits at the level of the household. It seems to me, this will be especially true with respect to the dynamics of a highly automated, post-consumer first world economy.)

Mr. Sale, there is a deep strain of social-economic history that reached a first crest in the British 17th century and would inform the utilitarians of the 19th century. This is part of the history of socialism and has to do with the the diggers and levellers, Winstanley, and a kind of Christian socialism. Later, I believe it was Bertrand Russell, who termed Marxism to be a 'Christian heresy.'

Of China, it is said their system is: state-planned capitalism; or, maybe better, state-planned confucian capitalism.

LeaNder

Thanks, MRW. Interesting links.

Shadow banking versus "too big to fail" surfaced in Clinton's debate with Sanders. Mind you, I wondered about the arguments of both concerning minimum wage. It seems slightly idealistic to double it short term. But then I looked a little closer into the issue and found out that Krugman seems to shift his position on the issue forward and backwards, too.

I do not really grasp your position concerning the Federal Reserve. Slightly obsessive? What alternative structure do you have in mind? A state own institution?

Besides you made a point concerning QE (Quantative Easing, I guess) that puzzled me as much as the terminology the SST member you responded to used.

LeaNder

MRW, I don't think he has bonuses and compensation in mind, but an established product that does not need any more investment and thus is a "Cash Cow" versus innovation and investment in future "Stars", and they will be "stars" and no "question marks" because the demand is already there.

"Verizon has shown a remarkable lack of interest in expanding its Fios high-speed Internet network, despite strong demand."

**********
this may be more what you are looking for, his linked praise of Larry Summers:
http://krugman.blogs.nytimes.com/2013/11/16/secular-stagnation-coalmines-bubbles-and-larry-summers/

"But as Larry emphasizes, there’s a big problem with the claim that monetary policy has been too loose: where’s the inflation? Where has the overheated economy been visible?

So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? "Summers’s answer is that we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn’t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s."

******
Bubbles of course increase bonuses too. No?

MRW

@LeaNder,

I do not really grasp your position concerning the Federal Reserve. Slightly obsessive?

Obsessive? No. 99% of Americans don’t understand how federal money, how federal accounting works. You’ve obviously heard about our deficit fights. They’re bogus! Even the current president went on TV in his first year and claimed that the US was broke, and that the federal government should tighten its belt like households have to do. Nothing could be further from the truth. Dead wrong. The federal government issues its own currency, something that state and local govts, businesses and households can’t do. (Wish I could.) How can the US go broke? It can pay all debts denominated in its own currency just fine.

So Americans are enduring austerity measures they don't need to endure. Or you hear chest-thumping Christians and publicly-pious people denigrate 'poor people' for being too stupid or lazy to get jobs, when only the federal government can increase jobs in a bad economy, as the Republicans understood in the 1950s when it was creating the middle-class. Because ONLY the federal government can SPEND into the real economy when things are bad to provision itself. No business--no good businessman--is going to hire people when they are no sales. Name one who would. That’s another thing Paul Krugman doesn’t understand. Businesses don’t invest in Plant and Materials when there are no sales, when people don’t have jobs to buy goods and services. Period. Why? Why spend the money? As a businessman, would you? Trickle-down is a fantasy and fairy-tale that Milton Friedman electrified a state governor with: Reagan. Reagan, like state govs Clinton and George W Bush, didn’t understand federal accounting either. Reagan, like the other two schmucks, thought you run a federal government the way you run a state govt (which has to earn income in order to survive). That you should balance the federal budget the way you need to balance a state govt. Bullshit.

What alternative structure do you have in mind?

None. I want people to understand the structure we’ve got. Only when you understand what you’ve got can you make intelligent ideas about how to improve upon it. I want people to understand how the people they’ve voted into Congress have ruined their children’s futures (for example) with their unforgivable ignorance about how federal accounting works. Kids with $30,000 to $200,000 student debt? You serious? Criminal. One in four children going hungry every night? In the United States of America? Criminal. 96,000,000 people still out of work and losing skills, income, and hope since 2008, and Americans think that is acceptable when the ability to reduce that underutilization of human capital is a fast vote away? (Hell, tack it onto one of the endless pro-Israel votes.) And won’t “cost taxpayers” a goddam dime? Criminal. But instead we get truly heinous moral and religious incompetents declaring that the reason why po’ people can’t get jobs, and riot in the streets, is because they are too lazy to work. When it is these moral and religious incompetents who are too fucking uneducated to even know what they are talking about. The Dunning-Kruger Effect. Look that up on Wikipedia.

A state own institution?

The Federal Reserve already is.

William R. Cumming

Richar! And ALL! Could Franklin [FDR] and Eleanor be more accurately described historically as SOCIALISTS?

MRW

Larry Summers is an idiot, and one of the architects of the Global Financial Crisis. He started under Clinton’s time. I have as much respect for Summers as I do for Clinton, which is zilch. Summers admitted to Tom Daschle years ago that he doesn’t understand reserve accounting (what the Fed does). And Obama used him as an advisor? Krugman’s respect for him? Member of the tribe.

Summers is the guy who ditched Christine Romer’s (head of Obama’s Council of Economic Advisors) memo to the Prez in 2009 that the stimulus needed to be $1.8 trillion to get the US out of the mess. Wouldn’t let Obama see it. Instead, Summers recommended an utterly insufficient $800 billion to Obama, who didn’t even spend that. Meantime, 10 million people lost their jobs and their homes, and over $14 trillion in wealth and retirements went up in smoke.

All completely unnecessary.

Fred

MRW,

"...Clinton put the institutional infrastructure in to make it all happen."

Say it ain't so, Joe.

MRW

Bubbles of course increase bonuses too. No?

LeaNder, if you want to understand this from an American point-of-view, listen to this. Clearest explanation you are going to get about what caused the housing bubble, and highly entertaining to boot. You’ll actually enjoy it. Put it on while you’re doing the dishes, or tidying up.
http://harryshearer.com/le-shows/may-1/

MRW

Yup.

You ever see this?
https://www.ssa.gov/history/Gulick.html

MRW

Say it ain't so, Joe.

In no particular order, and these are just the biggies that come immediately to mind:

• Bought Greenspan and Rubin’s bullshit two weeks before he was inaugurated (Adam Curtis recorded Rubin recounting this) that the US was broke, so had to let the markets run unregulated. If Greenspan had said this to a sitting president, which Clinton wasn’t then, he would be in jail for sedition. But Greenspan and Rubin knew he had a state-governor mindset about balancing the budget. Manipulated him.

• Ripped up the welfare safety-net without replacing it with a jobs program, impoverishing millions of low-income families whose jobs were flying overseas.

• NAFTA

• WTO

• China Most Favored Nation Status, courtesy of that miserable POS and then private citizen Rahm Emanuel

• Dismantled Glass-Steagall

• Made it against the law to regulate derivatives (budget addendum December 2000, snuck it in)

• Passed the Balanced Budget Act with the help of lawyer-architect financial idiot Jack Lew

• Produced a federal government surplus and bragged about it. When the federal government is in surplus, the private sector is in deficit. Take that to the bank. And vice versa. Has to be. Think about it. When the US federal government has a surplus of US dollars, who has a lack of them? Everyone else: the non-federal government sector, both domestic and foreign. But it’s when the private domestic sector is in deficit that poverty and destitution in the US erupts. And what was Greenspan’s response to this looming disaster? He told everyone to take out secondary mortgages to make up for the lack of sufficient living wages; the very same debt that came back to bite them horrifically in 2008.

The monthly US Treasury Statement actually records a government surplus as a negative. That ought to tell you something.

Mark Gaughan

Tyler,
It was easy coming to that conclusion. How could you not?
Arthur Sulzberger Jr. in his article, “Builders and Titans” wrote that Carlos Slim “has funded extensive public-health education programs and why he’s helped thousands of students throughout Latin America get their own laptops and learn more about digital technology.”
He’s had “a profound and lasting effect on millions of individuals in Mexico and neighboring countries…”
Krugman’s article is titled, “Robber Baron Recessions”
Krugman wrote that corporate behavior in the U.S. isn’t doing any of what Mr. Slim is doing.
Sulzberger’s piece doesn’t “take down” Krugman at all. It does verify Krugman.
It was quite clever of you calling me moon man.
Today, Tyler, the sky is clear blue, no clouds.
You’re right. You have no clue.
Mark

Farooq

".....the ability to reduce that underutilization of human capital is a fast vote away? "

What are your thoughts on universal basic income?

You once posted a talk by Bill Mitchell on the concept of "full employment" which I found interesting and worth pondering over. Lacking background in economics I am hard pressed to understand all implications of the concept in a more holistic fashion.

Bill used the example of cotton production in Australia and how government would buy and store the excess commodity when market was flooded and then release when the commodity was scarce to smoothen the impact on producers and buyers all year round.

How would a similar government intervention can be devised to ensure "full employment" for the workers in your opinion? Will government work with companies and pay them while demand is low for their service/product so they don't lay off workers? Or will government "buy and stock" products and services by intervening in the market as buyer? How would the later work for services I am unable to comprehend.

One criticism I can level on the above method based on my increasing realization is that the number of jobs is decreasing(permanently lost) all round due to automation. The above approach may smoothen the fluctuations caused by demand supply cycle but does not address the permanent job loss in economy. Perhaps government can invest and grow newer industries to make up for job loss but given the nature of new industries that have emerged in recent past, the large number of low/medium skilled people cannot benefit from them.

Would appreciate your response.

Mark Gaughan

Yep.. people love capitalism as long as it benefits them.

Mark Gaughan

Thanks for the links.

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