Politics as Economics

[cyu]

This isn't really even about economics, but the role that politics plays in shaping the economic environment that various economic theories have to operate in

http://www.salon.com/2012/04/06/the_wall_street_backlash/

in the words of Roger Beverage, president and CEO of the Oklahoma Bankers Association, “Congress isn’t afraid of bankers. They don’t think we’ll do anything to kick them out of office. We are trying to change that perception.”

Beverage and his colleague are creating the industry’s first super PAC. They’re calling it – we’re not making this up – “Friends of Traditional Banking”

Matt Packard, the super PAC’s chairman, told The American Banker, “If someone says I am going to give your opponent $5,000 or $10,000, you might say, ‘Yea, okay.’ But if you say the bankers are going to put in $100,000 or $500,000 or $1 million into your opponent’s campaign, that starts to draw some attention.”

four years after Wall Street helped cause the worst economic downturn since the Great Depression and prompted a $700 billion taxpayer bailout, its lobby is regaining its power to blunt or deflect efforts to rein in the banks.

the Los Angeles City Council is considering an ordinance that would gather foreclosure and other data on banks that do business with the city. Officials in Kansas City, Mo., passed a resolution directing the city manager to do business only with banks that are responsive to the community. And here in New York City, legislation is pending to require banks to reinvest in local neighborhoods if they want to hold city deposits. Similar actions are underway in other cities.

[cyu]

http://krugman.blogs.nytimes.com/2013/11/27/the-trouble-with-economics-is-economists/

The mania for financial deregulation didn’t come out of standard economic analysis — in fact, it flew in the face of the canonical model of banking crises. It’s true that few economists tracked the rise of shadow banking that bypassed the traditional safeguards — but that was a problem of vigilance, not bad theory.

Efficient markets theory arguably deserves more blame for the failure of too many economists to recognize the housing bubble, but textbook economics always presented EMT as a baseline, not a revealed truth.

As for the crisis response, the remarkable thing has been the determination of policy makers to do the opposite of what textbook macroeconomics said they should have been doing. the amazing thing has been to watch the proliferation of newly invented models to justify doing the opposite of what Econ 101 says.

many prestigious economists were all too eager to turn their backs on standard macro, even when it was working very well, on behalf of their political leanings.

there is something wrong with the structure of the economics profession. We don’t seem to need different economics as much as we need different economists.

[cyu]

http://www.revleft.com/vb/greeces-offer-eu-t192365/index.html?p=2823561#post2823561 (http://www.revleft.com/vb/greeces-offer-eu-t192365/index.html?p=2823561#post2823561)

http://www.zerohedge.com/news/2015-04-10/nikkei-hits-20000-after-japans-economy-minister-says-bubbles-are-good

Sometimes I wonder if "developed nations" are only "developed" because they've managed to trick "poor nations" into giving them useful stuff in exchange for useless stuff. See? Our national currency is safer than yours - that's why you should want our national currency. See? Our stock market more valuable than yours - that's why you should give us all your stuff in exchange for shares from our stock market. See? Our real estate is much more valuable than yours - that's why you should give us all your stuff in exchange for some of our waterfront.

[cyu]

There are no markets left in any meaningful sense of the word - just a raging casino infected with the madness of the crowds and the central bank pied pipers who mesmerize them.

it is “constructed GDP” which has been fabricated out of centrally issued and allocated fiat credit. the explosion of debt has resulted in not only trillions of artificial “printing press GDP”, but, more importantly, in a stupendous accumulation of over-valued and uneconomic “assets” on both public and private accounts.

http://www.zerohedge.com/news/2015-04-23/its-mania-behold-red-chips-and-big-macs

If economic power is accumulated, it eventually allows you to buy political power, and when you have enough political power, you can pass any economic laws you want, including granting yourself the ability to print money.

I'd imagine different levels of the ruling class. At the top, they know the economy is just a joke - they don't even need big personal bank accounts. They can appear poor, and still conjure money out of thin air on an as-needed basis, so they can stay safe from the unwashed masses. A lower level of the ruling class still has to rely on their actual bank accounts and investments for economic power - because this is more visible, they are more vulnerable to the masses. Some of them know that "the market" is a scam that be pushed around by the whims of national banks - others actually still believe in "market forces" involving customers and "rational" investors.

There are sharks and there are remoras that feed off the kills of the sharks. In the investment community, you can be a remora and still be filthy rich. But if the sharks turn on you, you're dead meat. Most of the economic activity of "Main Street" goes unnoticed by the sharks - to them, it's too insignificant to bother with. When they move markets, it's not to get involved in minor products or even minor countries, it's to crush major governments that they feel have defied them or are seen as some kind of threat.

[cyu]

When you're basically printing money to buy stocks, whatever you're printing money to buy becomes overvalued. When stocks are overvalued, it just means it's doomed to crash. Another side effect of printing money is that it also devalues the currency. So what happens if both the stock market and the currency crashes? The end of capitalism. Maybe they can hold off a stock market crash by continuing to print and buy - but it just makes the problem worse. When people abandon the currency...

http://blogs.telegraph.co.uk/finance/files/2012/04/Weimar-republic.jpg

...will the ruling class try to deflect blame by trying to find a new scapegoat?

[cyu]

Malice is the damage control used to hide incompetence.

[ckaihatsu]

There are no markets left in any meaningful sense of the word - just a raging casino infected with the madness of the crowds and the central bank pied pipers who mesmerize them.


Okay, despite the hyperbole, I'll agree with the overall point here -- yes, the stock market is reaching junk-bond status (of sheer speculation), if it hasn't already. (See: the year 2000.)





it is “constructed GDP”


WTF is 'constructed GDP' -- ?? -- !





which has been fabricated out of centrally issued and allocated fiat credit. the explosion of debt has resulted in not only trillions of artificial “printing press GDP”,


And wtf is 'printing press GDP' -- ??

GDP isn't subject to monetary policy manipulation, as is being suggested here -- GDP is total productivity by country, per year, which can be compared to population growth for the year, to see if a country's economy is growing sufficiently to accomodate new persons and their economic needs, or not.

Also, the 'explosion of debt' is not automatically a *bad* thing for the working class -- you're falling sway to this libertarian shit which takes the perspective / stance of *monetarism*, or money-holders, as a default. (You need to be much more careful with this shit.)

This emphasis on debt uses '70s-era nationalist anxiety and scare-mongering, on the basis of monetary (asset) ownership, to shriek that 'the sky is falling' because there's an overall increase in (U.S.) national debt.

This is only of concern to those who *have something to lose*, and is *not* a concern for those who are either debtors and/or working-class, since their/our power is *not* with the ownership of capital, but rather is with purchasing power, which can be *aided* with increased economic velocity, as through increased wages and cheaper debt.

Please note that, despite this 'explosion of debt', the world economy is experiencing historic levels of *deflation* in the major advanced economies, which is synonymous with *over-valuation*, *not* under-valuation, as is suggested by this hyper-inflation hysteria.

Effectively this libertarian drivel is conflating real economic growth -- GDP -- with the speculative over-valuations of the stock market. These two are *not* the same.





but, more importantly, in a stupendous accumulation of over-valued and uneconomic “assets” on both public and private accounts.


Okay, so *this* part is acknowledging the prevailing dynamic of deflation in an overall *moribund* world economy.





http://www.zerohedge.com/news/2015-0...s-and-big-macs


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If economic power is accumulated, it eventually allows you to buy political power, and when you have enough political power, you can pass any economic laws you want, including granting yourself the ability to print money.


As if this is the be-all, end-all determining factor of global economics, never mind the actual objective functioning (or dysfunctional) dynamics of capitalist economics itself.

By this reasoning the government of Zimbabwe should be the greatest nation on earth, because of its printing-press prowess:





Hyperinflation in Zimbabwe was a period of currency instability that began in the late 1990s, shortly after the confiscation of private farms from white landowners, towards the end of Zimbabwean involvement in the Second Congo War. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. However, Zimbabwe's peak month of inflation is estimated at 79.6 billion percent in mid-November 2008.

In 2009, Zimbabwe stopped printing its currency, with currencies from other countries being used.[1] By the end of September 2015, Zimbabwe plans to have completed the switch to the US dollar.[2]




https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe


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I'd imagine different levels of the ruling class. At the top, they know the economy is just a joke - they don't even need big personal bank accounts. They can appear poor, and still conjure money out of thin air on an as-needed basis,


Why are you conflating cash with bourgeois power -- ??

Your own arguments in past threads show you to know better -- there are the social influences of media, asset ownership, labor exploitation, government positions, etc. (!)





so they can stay safe from the unwashed masses. A lower level of the ruling class still has to rely on their actual bank accounts and investments for economic power - because this is more visible, they are more vulnerable to the masses. Some of them know that "the market" is a scam that be pushed around by the whims of national banks -


As though national central banks "control" capitalist economic dynamics -- this is a *contradiction*, given the libertarian alarmism rhetoric (and reality) in your posts that you reference and stand-behind.





others actually still believe in "market forces" involving customers and "rational" investors.

There are sharks and there are remoras that feed off the kills of the sharks. In the investment community, you can be a remora and still be filthy rich. But if the sharks turn on you, you're dead meat. Most of the economic activity of "Main Street" goes unnoticed by the sharks - to them, it's too insignificant to bother with. When they move markets, it's not to get involved in minor products or even minor countries, it's to crush major governments that they feel have defied them or are seen as some kind of threat.


cyu, why not just leave anarchism altogether and announce yourself to be a fucking libertarian -- ?

I think it would lessen your cognitive dissonance and also make it easier on anyone who happens across this shit -- you continue to buy the libertarian line that there are 'Masters of the Universe' who somehow autonomously 'move markets' and defy the GDP of actual market functioning (by glibly denying that markets even exist, or that government economic policy -- as from the Troika -- is not complicit with the aims of privatization).





When you're basically printing money to buy stocks, whatever you're printing money to buy becomes overvalued.


Then how can you explain the current reality of historically low interest rates, which indicates an *oversupply* of capital goods -- ? (You're only looking at the bubble of stock markets.)





When stocks are overvalued, it just means it's doomed to crash. Another side effect of printing money is that it also devalues the currency.


Then how can you explain the surging world confidence in the U.S. dollar -- ? -- !





So what happens if both the stock market and the currency crashes? The end of capitalism. Maybe they can hold off a stock market crash by continuing to print and buy - but it just makes the problem worse. When people abandon the currency...

[IMG]http://blogs.telegraph.co.uk/finance/files/2012/04/Weimar-republic.jpg[IMG]

...will the ruling class try to deflect blame by trying to find a new scapegoat?


Yeah, let me know when the capital ownership of the world runs out of currency vehicles for their asset-sheltering....

[cyu]

wtf is 'printing press GDP' ...By this reasoning the government of Zimbabwe should be the greatest nation on earth, because of its printing-press prowess

The ruling class is afraid poverty resulting from mass unemployment will lead to revolution, so they are basically printing money (ie. quantitative easing) to try to keep the economy alive. GDP results from exchange of money. If I pay you $5 million to dig a hole, and you pay me $5 million to fill it back up, how much GDP is that? Has anything productive been done?

Zimbabwe can't force other nations to use the dollar. The American regime has regularly used its military to overthrow nations hinting at not using the dollar (in oil trade, for example). But that is easier when you're invading small nations - it's harder when Russia and China want to abandon the dollar.


how can you explain the surging world confidence in the U.S. dollar ...the world economy is experiencing historic levels of *deflation* in the major advanced economies, which is synonymous with *over-valuation*, *not* under-valuation

How can you explain the price of the Mona Lisa? Whoever controls the most wealth determines prices. If everyone had the same amount of money, then prices would more closely reflect the relative demand for various things. If 99% of the money were owned by one person, then prices would be determined by how much that one person is willing to spend on the Mona Lisa (or on stocks, gold, national currencies, etc). Of course, there actually isn't surging world confidence in the dollar, since China and Russia are making moves to get rid of it. If you don't realize the panic that currently exists among the investment class, you haven't been hanging around them ;)

Deflation would be fine if poor people could afford more stuff, but since the money is going to rich people, poor people still can't buy what they want - while demand as measured by human need is still there, demand as measured by spending power is not there to sustain prices.


*not* a concern for those who are either debtors and/or working-class, since their/our power is *not* with the ownership of capital, but rather is with purchasing power

No, the working class has very limited purchasing power. It is the rich that have purchasing power, and that is why a capitalist economy produces what the rich want, and not what the poor want. What the working class has is the ability to produce stuff, and the ability to hold weapons.

[cyu]

Considering the amount of world poverty currently being ignored, combined with an over-exaggerated, delusional campaign in the mass media, it's starting to remind me of The Great Leap Forward.

[ckaihatsu]

The ruling class is afraid poverty resulting from mass unemployment will lead to revolution, so they are basically printing money (ie. quantitative easing) to try to keep the economy alive.


Yes, basically.





GDP results from exchange of money.


Not quite -- this is an oversimplification.





Asset value– GDP does not take into account the value of all assets in an economy. This is akin to ignoring a company's balance sheet, and judging it solely on the basis of its income statement.




GDP is a neutral measure which merely shows an economy's general ability to pay for externalities such as social and environmental concerns.[29] In essence it is intended to be a measure of total national economic activity — a separate concept.




https://en.wikipedia.org/wiki/Gross_domestic_product


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If I pay you $5 million to dig a hole, and you pay me $5 million to fill it back up, how much GDP is that? Has anything productive been done?


This is a facile and artificial illustration -- the real world doesn't operate this way, except for entrenched centers of privilege and patronage.





Zimbabwe can't force other nations to use the dollar. The American regime has regularly used its military to overthrow nations hinting at not using the dollar (in oil trade, for example). But that is easier when you're invading small nations - it's harder when Russia and China want to abandon the dollar.


Off-topic, but acknowledged.





How can you explain the price of the Mona Lisa? Whoever controls the most wealth determines prices. If everyone had the same amount of money, then prices would more closely reflect the relative demand for various things. If 99% of the money were owned by one person, then prices would be determined by how much that one person is willing to spend on the Mona Lisa (or on stocks, gold, national currencies, etc).


No argument, but you're again going off on tangents -- you're holding up a *libertarian* line of 'printing press prowess confers political power', while at the same time saying that present-day *overuse* of deficit spending ('quantitative easing') is leading to *crisis* and *panic*. These are contradictory assertions.





Of course, there actually isn't surging world confidence in the dollar, since China and Russia are making moves to get rid of it. If you don't realize the panic that currently exists among the investment class, you haven't been hanging around them ;)


Okay.





Deflation would be fine if poor people could afford more stuff, but since the money is going to rich people, poor people still can't buy what they want - while demand as measured by human need is still there, demand as measured by spending power is not there to sustain prices.


Okay, agreed.





No, the working class has very limited purchasing power. It is the rich that have purchasing power, and that is why a capitalist economy produces what the rich want, and not what the poor want. What the working class has is the ability to produce stuff, and the ability to hold weapons.


No argument.

[cyu]

There are many problems with using GDP to measure the economy. For example, having sex with your partner does not contribute to the GDP if it's free, while having sex at a legal brothel contributes to the GDP. Similarly, if family members help you take care of your kids, it does not contribute to the GDP, while paying to put your kids in a child care center does contribute to the GDP.

If a "primitive" economy operated based entirely on informal relationships between friends and family, there would be no measurable GDP. But does that actually mean they are "unproductive"?

This isn't to saying the GDP is entirely inaccurate. However, it is a mix of both valid measures of the state of the economy, and useless measures. It precisely because it has useful parts that allow it to be tolerated, but problems arise when the useless parts become significant. At some point, it becomes merely a measure of how "financialized" an economy has become.

Like many pro-capitalist libertarians, I do not trust "the government" to print or determine the money supply. However, unlike pro-capitalist libertarians, I do not try to pretend gold has any value. As far as I'm concerned, gold is like any other fiat currency - a false sense of wealth and security - while real wealth comes from the means of production, and the people who use the means of production to make things.

[cyu]

When you're basically printing money to buy stocks, whatever you're printing money to buy becomes overvalued. When stocks are overvalued, it just means it's doomed to crash.

As of last night, there were around 570/1694 Shenzhen stocks halted/suspended and hundreds more on the Shanghai bourse leaving more than 54% of all Chinese stocks frozen ($2.6 trillion or 40% of value). if it's not open, you can't sell it and the price cannot fall!

http://www.zerohedge.com/news/2015-07-07/china-futures-plunge-8-over-half-stocks-suspended-margin-debt-crashes-most-record

The irony of running an economic system based on fraud, is that if you're truly successful, other economies become convinced your fraud is the real thing, and the fraud spreads, eventually engulfing the entire planet.