No Time for Utopian Anti-Interventionism

[jtabeb]

Re: No Time for Utopian Anti-Interventionism

Thus, as has been opined in many threads here, the initial Paulson bailout plan is, as "symbols" has graphically pointed out, no more than a Godfather-type "offer that cannot be refused." As such, it is anarchistic in nature, using the bludgeon of fear to preclude proper due diligence with respect to the self-interest of the involved parties.



As John Donne said,



If we are to live in a human society, and pay at least a passing acknowledgement to the benefits therefrom derived, let not our hearts be so hard, to commit to spiting ourselves, for the sake of fulfilling our resentful desires or indulging our sense of schadenfreude . . .

Could not say it better myself. Thank you.

[bvaliant]

Re: No Time for Utopian Anti-Interventionism

You are an anarchist, not a Libertarian.

Did you know that the terms "Libertarian" and "Anarchist" used to be synonymous?

There are actually those who do not view the term as an insult or pejorative, and some of them don't even wear black bandannas or blow things up.

[rnjboy]

Re: No Time for Utopian Anti-Interventionism

here, here

[EJ]

Re: No Time for Utopian Anti-Interventionism

Wrong it is a class struggle, between EARNED and UN-EARNED INCOME, what country do you live in? Have you ever talked to someone that makes less than $50,000 a year, or $25,000?

It is a class struggle because the Earned income class has had real wages frozen while nominal gains due to inflation "trickles-up" to the rentier class of FIAT financed asset holders (traders).

Were it not for inflation the picture would be exceedingly clear to all. Just subtract 10% from workers wages every year in nominal terms whilst non-traded goods and services maintain a constant price level. This is neo-serfdom, a systems that VERY MUCH pits labor against capital. But in the real world the effect is much more hidden from public scrutiny and much more vicious as inflation is such a powerful wealth redistribution tool (that only flows upward, I might add).

"No argument there. But who let them? Who voted for the politicians that ran our country while this disaster developed"

I love this quote, you chastise idealogues, but then become one to dismiss "their" argument. And you expose your own hypocrisy by quoting as fact one of the biggest, if not the biggest, fallacies in all of american politics.

Let's see, people voted for elected officials that LIED to them and later went on to make extreemly poor decisions because:
(no-one disputes this, I hope?)

a. They were stupid (not skeptical enough)
b. The media became less independent and more consolidated and in the process restricted debate by crowding out non-mainstream viewpoints.
Thereby, slowy dumbing down debate until, as it stands currently, the depth of discussion produces no actual public education, just a circus.

(That the rinse in political power of the preferred media outlets directly parallels the rise in political power of the FIRE players is not surprising. The exact same mechanism, extreem wealth accumulation that led to domination of the political process and the crowding-out of political access for the general public, manfisted itself in all of the power structures of our society.)

c. Willfully ignored the factual truth when it was presented to them by the mass media even though it was in a clear and understandable format that was dutifully and rigerously examined.
d. were intentionally mis-led by government officals, academics, and "experts" in all kinds of reports and statistics that purported to show the status of everything with and without the effects of inflation.

If you answered all except for "C" you have the correct answer.

Give the people shitty information to base their decisions off of and guess what? They make really, really bad ******* decisions. NO SHIT, REALLY?
( I think it's called GIGO )

EJ, you can be a real elitist swine some times.

At least Hudson for all his flaws makes a fair assessment of the situation, you do not, I'm afraid.

I apologize to grapejelly for my calling him, even in jest, an anarchist and a socialist. These were intended as friendly barbs, but I realize now that he may not have taken it that way. It skirts the one and only hard and fast rule here which is that we all treat each other with respect, even if we disagree.

That certainly means no name calling, jtabeb. It will not be tolerated.

I agree with most of what you say here, about the FIRE Economy, distribution of wealth between debtors and creditors, and so on. These are points that I have expressed here for years. We agree until we get to the point that is the subject of this thread: the need for intervention now and whether intervention was attempted in the 1930s BEFORE the economy collapsed.

Goldbugs hate to hear this but dogmatic adherence by the US to the gold standard in the 1930s caused the US money supply to implode in the 1930s. Fisher predicted this in January 1930. The economies of countries such as France that suspended the gold standard temporarily fared far better. In the end, FDR had to cancel the gold standard anyway in a draconian way, after the economy collapsed.

Now our economy collapsing again because a debt deflation is taking its natural course. Without a gold standard the Fed is this time able to expand the money supply, but as fast as they pour money into the broken credit structure it is hoarded, much as in the 1930s, or is pouring out the hole in the bottom of the system as liquidations of assets.

Credit for small and large business and personal loans is quickly drying up, just as in the 1930s. This article is typical.

If this continues at this rate then within a year thousands of perfectly well managed companies with little debt and only modest financing needs will go under and tens of millions of workers will be laid off. Unemployment will surpass 10%. Federal income tax revenues will evaporate on top of the collapse of capital gains tax revenues and of local tax revenues from property taxes as has already occurred in states like NY. The knock-on effects include rising crime as prisons are emptied out because we will not be able to afford them. This is what the "let God sort it out" adherents fail to grasp. A debt deflation is not like a forest fire that burns only the dead wood and leaves the strong. It burns everything because the period of excessive credit growth that preceded it lulled the vast majority of businesses and households into dependence on a continuous flow of credit. They all go bankrupt.

Many of us here have no debt and plenty of liquid assets to protect us from such a fire. I get the sense that there are some here who relish the idea of being in a strong financial position while so many others are not; it's one way to rise above others, I suppose, for everyone else to fall. But the economic collapse survival fantasy of the guns and gold crowd is flawed. If the collapse comes to pass there will be no one to come pick the trash. No one to see that the water and food supply is not contaminated. No one to keep carjackers out of your city. Much of the order around us that is financed by taxes that we take for granted falls apart.

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”
-Andrew W. Mellon

GRG's quote expresses the position of the FIRE Economy V1.0 leadership of the day. It served their interests to crash the economy. They got to buy it up again later at fire sale prices.

Clearly it was a mistake to have allowed the US economy to become so dependent on debt growth for economic growth. I explain, and attempt to simplify, in my book the complex parallel developments that created the FIRE Economy since the early 1980s. But by allowing the FIRE Economy to crash, versus develop a constructive transition, libertarians are serving populists with the rallying cry that “capitalism has failed.” You can already read it on the blogs and in some mainstream papers, and the impact of the credit crunch on Main Street has only begun.

At that point, the logic of the American political economy dictates a hard swing away from market-based solutions. As an entrepreneur and capitalist, that’s not good for me and certainly not good for the country.

[Charles Mackay]

Re: No Time for Utopian Anti-Interventionism

Did you hear Marc Faber on Bloomberg this morning? When asked about the Bailout, he said in jest that the only problem with it is that it's too small. "Mr Bernanke also needs to buy everyone's Nasdaq stocks at the high in 2000 and all the homes at the bubble top in 2006. Then it would be fair to the elites as well as the people. ;);)

[orion]

Re: No Time for Utopian Anti-Interventionism

EJ, Having a strong bent towards Austrian economics I will probably be put in the crash and burn school. However my view is of two choices, 1) slow semi soft arrival at ka-poom inflection point, or 2) the "crash and burn now" route. Obviously I would like justice to be done but choice 1 will hopefully avoid the risks that are let loose in crash and burn. My consolation to fellow crash and burn tendency folks is we are headed for the inflection point one way or another (this is what I think you are stressing with the capsising ship metaphor), we will have debauched currency, innocents will suffer and maybe some of the guilty will be punsihed. However reaching the inlfection point is what I think we all look for because that is where change can finally happen.

[Tulpen]

Re: No Time for Utopian Anti-Interventionism

Did you hear Marc Faber on Bloomberg this morning? When asked about the Bailout, he said in jest that the only problem with it is that it's too small. "Mr Bernanke also needs to buy everyone's Nasdaq stocks at the high in 2000 and all the homes at the bubble top in 2006. Then it would be fair to the elites as well as the people. ;);)

LOL, the interviewer on Bloomberg does not even catch the sarcasm of Faber.

One funny comment with regard to next years economy: Faber expects that producing countries are going to be more affected than the USA which "hardly produces anything": "In the US, if consumption goes down it is not the end of the world, Americans will simply become a little bit slimmer and that's good and healthy".

Here is the clip:
http://www.bloomberg.com/avp/avp.htm...sm5CV6HVxY.asf

[bart]

Re: No Time for Utopian Anti-Interventionism

...
But by allowing the FIRE Economy to crash, versus develop a constructive transition, libertarians are serving populists with the rallying cry that “capitalism has failed.” You can already read it on the blogs and in some mainstream papers, and the impact of the credit crunch on Main Street has only begun.
...

And the various lunatic fringes, some of whom call themselves libertarians, fail to know their history or even what Adam Smith had to say about justice, greed and capitalism:

"Justice [the human virtue of not harming others]…is the main pillar that supports the whole building. If justice is removed, the great fabric of human society which seems to have been under the darling care of Nature must in a moment crumble into atoms….Men, though naturally sympathetic, feel so little for others with whom they have no particular connection in comparison to what they feel for themselves. The misery of one who is merely their fellow creature is of so little importance to them in comparison to even a small convenience of their own. They have it so much in their power to hurt him and may have so many temptations to do so that if the principle of justice did not stand up within them in his defense and overawe them into a respect for his innocence, they would like wild beasts be ready to fly upon him at all times. Under such circumstances a man would enter an assembly of others as he enters a den of lions."
-- Adam Smith, "The Wealth of Nations"

[we_are_toast]

Re: No Time for Utopian Anti-Interventionism

EJ, thank you for expressing ideas that are shared by others in a way that some of us are incapable of.

Many of us here have no debt and plenty of liquid assets to protect us from such a fire. I get the sense that there are some here who relish the idea of being in a strong financial position while so many others are not; it's one way to rise above others, I suppose, for everyone else to fall. But the economic collapse survival fantasy of the guns and gold crowd is flawed. If the collapse comes to pass there will be no one to come pick the trash. No one to see that the water and food supply is not contaminated. No one to keep carjackers out of your city. Much of the order around us that is financed by taxes that we take for granted falls apart.

Anyone who has not visited a 3rd world country needs to hop on a plane and visit one tomorrow to understand how the well off live. Houses surrounded by walls with broken glass embedded in the concrete, 24 hour guards, when you drive somewhere you have to find a guarded place to park your car or your car will be stripped before you can get 10 feet away. Hell, go to the "bad" side of any city in America and imagine that spreading far and wide.

The government has to step in and do whatever it can to prevent the 3rd world America that will be the inevitable result of doing nothing. We can argue about what the government should do, but failure to do something is not an option.

[sabocat]

Re: No Time for Utopian Anti-Interventionism

rj1, the chances that you would discern my political point of view from that post is exactly zero. I don't post to express my political views. That isn't the point of the board. Near as I can tell, the ethic behind the board is theoretically-driven empirical inquiry about the economy. That is the only reason it is worth paying for. When it becomes about politics or dogmatic braying about the economy or politics it's just another website.

[Wild Style]

Re: No Time for Utopian Anti-Interventionism

I apologize to grapejelly for my calling him, even in jest, an anarchist and a socialist. These were intended as friendly barbs, but I realize now that he may not have taken it that way. It skirts the one and only hard and fast rule here which is that we all treat each other with respect, even if we disagree.

That certainly means no name calling, jtabeb. It will not be tolerated.

I agree with most of what you say here, about the FIRE Economy, distribution of wealth between debtors and creditors, and so on. These are points that I have expressed here for years. We agree until we get to the point that is the subject of this thread: the need for intervention now and whether intervention was attempted in the 1930s BEFORE the economy collapsed.

Goldbugs hate to hear this but dogmatic adherence by the US to the gold standard in the 1930s caused the US money supply to implode in the 1930s. Fisher predicted this in January 1930. The economies of countries such as France that suspended the gold standard temporarily fared far better. In the end, FDR had to cancel the gold standard anyway in a draconian way, after the economy collapsed.

Now our economy collapsing again because a debt deflation is taking its natural course. Without a gold standard the Fed is this time able to expand the money supply, but as fast as they pour money into the broken credit structure it is hoarded, much as in the 1930s, or is pouring out the hole in the bottom of the system as liquidations of assets.

Credit for small and large business and personal loans is quickly drying up, just as in the 1930s. This article is typical.

If this continues at this rate then within a year thousands of perfectly well managed companies with little debt and only modest financing needs will go under and tens of millions of workers will be laid off. Unemployment will surpass 10%. Federal income tax revenues will evaporate on top of the collapse of capital gains tax revenues and of local tax revenues from property taxes as has already occurred in states like NY. The knock-on effects include rising crime as prisons are emptied out because we will not be able to afford them. This is what the "let God sort it out" adherents fail to grasp. A debt deflation is not like a forest fire that burns only the dead wood and leaves the strong. It burns everything because the period of excessive credit growth that preceded it lulled the vast majority of businesses and households into dependence on a continuous flow of credit. They all go bankrupt.

Many of us here have no debt and plenty of liquid assets to protect us from such a fire. I get the sense that there are some here who relish the idea of being in a strong financial position while so many others are not; it's one way to rise above others, I suppose, for everyone else to fall. But the economic collapse survival fantasy of the guns and gold crowd is flawed. If the collapse comes to pass there will be no one to come pick the trash. No one to see that the water and food supply is not contaminated. No one to keep carjackers out of your city. Much of the order around us that is financed by taxes that we take for granted falls apart.

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”
-Andrew W. Mellon

GRG's quote expresses the position of the FIRE Economy V1.0 leadership of the day. It served their interests to crash the economy. They got to buy it up again later at fire sale prices.

Clearly it was a mistake to have allowed the US economy to become so dependent on debt growth for economic growth. I explain, and attempt to simplify, in my book the complex parallel developments that created the FIRE Economy since the early 1980s. But by allowing the FIRE Economy to crash, versus develop a constructive transition, libertarians are serving populists with the rallying cry that “capitalism has failed.” You can already read it on the blogs and in some mainstream papers, and the impact of the credit crunch on Main Street has only begun.

At that point, the logic of the American political economy dictates a hard swing away from market-based solutions. As an entrepreneur and capitalist, that’s not good for me and certainly not good for the country.

Great post. I am neither libertarian, nor capitalist. I have no political leaning personally. With that said, I think the only flaw in your statement is you are counting heavily on what will happen if they empty the jails. I am from Brooklyn and I assure you, if things get as bad as many are predicting, with or without people coming home from the Penitentiaries, you will see levels of street crime from people who have not been to jail the likes of which we only saw back in the 80s/90s.

I think any bail out needs to help main street and wall street equally.

Even with a sensible bail out, do you still predict double digit unemployment?

For those who are against any bailout, do you think our society is really ready for what comes with that? Also, do you not think that a catastrophic economic event here could definitely change America for the worse? This isn't like the great depression. Mentalities and communities have changed and many times for the worse. Do you think the average joe shmoe will be in a state of mind to help rebuild after such a collapse? I mean to say, how do you guys see such a situation playing out?

[phirang]

Re: No Time for Utopian Anti-Interventionism

EJ, thank you for expressing ideas that are shared by others in a way that some of us are incapable of.


Anyone who has not visited a 3rd world country needs to hop on a plane and visit one tomorrow to understand how the well off live. Houses surrounded by walls with broken glass embedded in the concrete, 24 hour guards, when you drive somewhere you have to find a guarded place to park your car or your car will be stripped before you can get 10 feet away. Hell, go to the "bad" side of any city in America and imagine that spreading far and wide.

The government has to step in and do whatever it can to prevent the 3rd world America that will be the inevitable result of doing nothing. We can argue about what the government should do, but failure to do something is not an option.

Yea, it's called central america (yelp): you can't even leave FLIP FLOPS on the beach in costa rica: they'll get stolen!

They have guys with shotguns guarding grocery stores, too!:eek:

[vinoveri]

Re: No Time for Utopian Anti-Interventionism

I
If this continues at this rate then within a year thousands of perfectly well managed companies with little debt and only modest financing needs will go under and tens of millions of workers will be laid off. Unemployment will surpass 10%. Federal income tax revenues will evaporate on top of the collapse of capital gains tax revenues and of local tax revenues from property taxes as has already occurred in states like NY. The knock-on effects include rising crime as prisons are emptied out because we will not be able to afford them. This is what the "let God sort it out" adherents fail to grasp. A debt deflation is not like a forest fire that burns only the dead wood and leaves the strong. It burns everything because the period of excessive credit growth that preceded it lulled the vast majority of businesses and households into dependence on a continuous flow of credit. They all go bankrupt.
.

Bingo, and this is the critical point to Main St. We want to insure that creditworthy individuals and business have access to capital, and right now credit is drying up (event though the central banks are pumping enormous amounts of liquidity into the system) because banks don't want to lend to other institutions because they don't know which are solvent and which may default on the loans.

So in order to get credit flowing, all the toxic debt needs to become transparent and liquidated, and then voila, no more fear of lending. So IMHO, this is what needs to be done - value the toxic assets and get a bid from the private markets.
There'll always be a bid, but the price might result in insolvency of the seller - and this is what needs to happen. Worst case, the government buys the debt at mark to market (let the CBO value the assets).

If 401k and pensions take haircuts b/c of asset markdowns, so be it. If institutions are insolvent b/c of their toxic debt assets, they need to go down. Solvent banks can strengthen their balance sheets and and new institutions can be capitalized.

What am I missing?

[phirang]

Re: No Time for Utopian Anti-Interventionism

Bingo, and this is the critical point to Main St. We want to insure that creditworthy individuals and business have access to capital, and right now credit is drying up (event though the central banks are pumping enormous amounts of liquidity into the system) because banks don't want to lend to other institutions because they don't know which are solvent and which may default on the loans.

So in order to get credit flowing, all the toxic debt needs to become transparent and liquidated, and then voila, no more fear of lending. So IMHO, this is what needs to be done - value the toxic assets and get a bid from the private markets.
There'll always be a bid, but the price might result in insolvency of the seller - and this is what needs to happen. Worst case, the government buys the debt at mark to market (let the CBO value the assets).

If 401k and pensions take haircuts b/c of asset markdowns, so be it. If institutions are insolvent b/c of their toxic debt assets, they need to go down. Solvent banks can strengthen their balance sheets and and new institutions can be capitalized.

What am I missing?

This whole balance-of-payments thing... kind of important.

[contrarymary]

Re: No Time for Utopian Anti-Interventionism

Yea, it's called central america (yelp): you can't even leave FLIP FLOPS on the beach in costa rica: they'll get stolen!

They have guys with shotguns guarding grocery stores, too!:eek:

I've learned much from this forum but rarely post comments, since I'm just a "regular" person. But since you all promise not to bite, this one caught my eye.

My daughter is currently in Guatemala. She has never been out of the country before. I just spoke with her last night. She was amazed to report that there were armed guards everwhere, including markets and cafes. Her husband is Guatemalan, so he can help explain the situation.

Anyway, I lean toward realism, sometimes I'm accused of pessimism. I do not see congress "doing the right thing", now or in the near future. Maybe never.

If I'm going to live in a Banana Republic, I may just go to Guatemala where at least it's warm and the scenery is beautiful.