Economics; the financial crisis

[Thirsty Crow]

Hullo everybody,

I'm posting this thread out of two reasons:

1) the latest recession, i.e. the financial crisis: I'm certainly no expert in economics, and that is why I don't really understand the underlying root causes for this our recession. I do have some vague notions but what I seek is clear understanding based on empircally verifiable facts. Can someone explain it in simple terms and substantiate the explanation maybe with a case study or anything which would definitely point in the right direction?

2) economics - as I've said, I'm no expert. I've come to think if people wish to understand the developments, both social and political, that they should understand economics and real, historical economic decisions, measures, factors etc. My question is the following: would you recommend me some introduction to economics as a scientific discipline, marxist and capitalist which would explain both historical development of the western economy and some key terms in contemporary theory and practice.

[Belisarius]

Mandel explains marxist economic theory in simple terms in this book:
http://www.marxists.org/archive/mandel/1967/intromet/index.htm

[bailey_187]

Sorry, but i cba to try to explain the financial crisis right now, but i will later. I will recommend you some economics books though:

John Bellamy Foster - The Great Financial Crisis
Magdoff - ABC of the Economic crisis: what working people need to know
Chris Harman - Economics of the madhouse
Wolff - Economics: Marxian versus neoclassical <--- this book will give u a good overview of he basics of Marxist economics and bourgeois economics
Stephen Sharpio - How to read Marx's capital

You should also check out the magazine Monthly Review. It also has online articles at http://mrzine.monthlyreview.org/

[Thirsty Crow]

The thing is that I've been havijng a lot of discussions with different people and one of the issues that came up was the "Miracle of Chile".

Now, one of my goals is also to try and understand whether claims such as that public spending (social programs and so on) in combination with efforts to increase worker's wages and their control over production lead to economic crises are in fact accurate. Basically, I want to understand the nature of the correlation between, let's say, Chile's economic growth and the increase of standards of living, on one side, and market liberalization reforms on other.
Some empirical studies would be great.

[RadioRaheem84]

A good study to read is the Anarchist FAQ. Go to Myths of the Capitalist Economy section and there should be a chapter on Chile's Economic "Miracle".

As far as the economic crisis goes, anything by the Monthly Review crowd will steer you in the right direction.

[ZeroNowhere]

Mandel explains marxist economic theory in simple terms in this book:
http://www.marxists.org/archive/mandel/1967/intromet/index.htm
Be aware that you're reading Mandel's views, rather than Marx's, however. I've never bothered with the Monthly Review guys (I only recall Foster citing Sweezy favourably, which is not a good sign), but keep that in mind there, too. As mikus from Libcom once pointed out, "Virtually every major exegesis of Capital has major confusion within it, whether it is Ernest Mandel's introductions or Paul Sweezy's Theory of Capitalist Development."

Anyway, regarding the crisis, the best investigation of that so far is probably this one (http://akliman.squarespace.com/persistent-fall/) by Kliman. A great speech regarding fictitious capital by Mike Egoavil is here (http://libcom.org/library/fictitious-capital-new-fangled-schemes-public-credit). A simple introduction to crisis theories by Anwar Shaikh is here (http://www.countdownnet.info/archivio/teoria/313.pdf). Though, of course, to understand the economy, there's nothing better than 'Capital'.

[Thirsty Crow]

Again, some ramblings on this topic.
I'd like some folks who get modern economics better than me to try and present an argument, lets say from a lassez faire (i.e. anarcho-capitalist) perspective, or any other apologetic one.

For example, one of the responses was:

A credit expansion created by the central bank encourages malinvestments that aren't backed by any real savings. A recession occurs when the structure of production is adjusted. I can't post links, but you can search YouTube for Peter Schiff's Mortgage Bankers speech, explaining the causes of the crash in 2006, or his lecture "Why the Meltdown Should Have Surprised No One", having the last laugh in 2009. There's also a rap video called "Fear the Boom and Bust" which will explain it all in six and a half minutes.

If you prefer writing, see Monetary Theory and the Trade Cycle by F. A. Hayek.
Now, I suppose that the root of the trouble, seen from such a perspective, is government action.
Which is in alignment with a lecture I once attended, during which a guy (a Marxist) presented their argument as "the government is the one to blame since they encouraged the credit expansion; however, government action cannot be taken apart from the banking lobbyists and other private sector forces which force their own issue; thus, the government serves only as a tool for what is perceived as a potential short-term boost in profits".

[anticap]

1) the latest recession, i.e. the financial crisis: I'm certainly no expert in economics, and that is why I don't really understand the underlying root causes for this our recession. I do have some vague notions but what I seek is clear understanding based on empircally verifiable facts. Can someone explain it in simple terms and substantiate the explanation maybe with a case study or anything which would definitely point in the right direction?

Do yourself a favor and watch Capitalism Hits the Fan (http://www.rdwolff.com/content/capitalism-hits-fan-movie) (full video at bottom of page). It's dry, but easy to understand. The hour won't be wasted, I promise (meaning, you won't come away feeling anywhere near as uninformed as you feel now).

While some may quibble over the details, the gist of it is fairly uncontroversial I think. Read the text on that page to get an overview of Wolff's thesis.

And remember that what happens in the U$ ripples outward (as I'm sure you're aware).

[S.Artesian]

Again, some ramblings on this topic.
I'd like some folks who get modern economics better than me to try and present an argument, lets say from a lassez faire (i.e. anarcho-capitalist) perspective, or any other apologetic one.

For example, one of the responses was:

Now, I suppose that the root of the trouble, seen from such a perspective, is government action.
Which is in alignment with a lecture I once attended, during which a guy (a Marxist) presented their argument as "the government is the one to blame since they encouraged the credit expansion; however, government action cannot be taken apart from the banking lobbyists and other private sector forces which force their own issue; thus, the government serves only as a tool for what is perceived as a potential short-term boost in profits".


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For your reading pleasure.

[el_chavista]

Now we know the truth. The financial meltdown wasn't a mistake – it was a con (http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-regulators-civil-charges)

The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday's announcement that the world's most famous investment bank, Goldman Sachs (http://www.guardian.co.uk/business/goldmansachs), is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world. Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we've seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.