Venezuelan troops seize shops over high prices

[RedSonRising]

President orders electronics chain to cut prices and slams "bourgeois parasites" he says are exploiting Venezuelans.

http://www.aljazeera.com/mritems/Images/2013/11/10//201311105828987734_20.jpg

Venezuelan soldiers have been sent into a chain of electronics stores in a campaign by President Nicolas Maduro's socialist government to stop an "economic war" of what it says are unjustified spiralling prices.

Authorities on Saturday arrested managers of the Daka chain, sent troops to occupy its five shops and forced the company to introduce cheaper prices.

That brought crowds to Daka's shops and sparked looting at one store in the central city of Valencia.

Maduro, who accuses rich businessmen and right-wing political foes backed by the US of waging an economic war against him, said the occupation of Daka was simply the "tip of the iceberg" in a nationwide drive against speculators.

In a speech to the nation on Saturday evening, he said looting in Valencia was an isolated incident and the real criminals were unscrupulous businessmen exploiting Venezuelans with unjustified price rises.

"The ones who have looted Venezuela are you, bourgeois parasites," Maduro said, accusing Daka of raising some prices of products beyond 1,000 percent of cost.

"We're going to comb the whole nation in the next few days. This robbery of the people has to stop," Maduro said. "You've not seen anything."

He showed particular astonishment at a washing-machine on sale for 54,000 bolivars - $8,571 at the official exchange rate of 6.3 bolivars to the US dollar.

Maduro's move against Daka, after weeks of warnings of a pre-Christmas push against private businesses to keep prices down, recalled the sweeping takeovers during the 14-year government of his predecessor, Hugo Chavez.

Bargain hunters

Soldiers organised hundreds of people into queues at Daka's store in Caracas, then called them in one by one.

"Inflation's killing us. I'm not sure if this was the right way, but something had to be done," said Carlos Rangel, 37, who was among the shoppers. "I think it's right to make people sell things at fair prices."

Venezuela’s annual rate of inflation is now 54 percent, the highest since Chavez came to power in 1999. Critics of the government say that is due to economic mismanagement rather than unscrupulous retailers.

Opponents say excessive government controls and persecution of the private sector are to blame for shortages of basic goods, and for price distortions caused by a black-market currency rate nearly 10 times higher than the official price.

The state sells a limited amount of US dollars at 6.3 bolivars, but given the short supply, some importers complain they are forced into a black market where the price is nearly tenfold higher.

"I have to buy goods with black market dollars at about 60 bolivars, so how can I be expected to sell things at a loss?” a businessman, who asked not to be identified, asked the Reuters news agency.

[Vladimir Innit Lenin]

Why doesn't he just fucking socialise the businesses?

Better, why doesn't he position the army there, and tell the workers to take the business and run it themselves?

I mean, I appreciate what he's doing, but it's hardly revolutionary. It can be reversed easily if it all depends on one man/one party being in power.

[RedSonRising]

Why doesn't he just fucking socialise the businesses?

Better, why doesn't he position the army there, and tell the workers to take the business and run it themselves?

I mean, I appreciate what he's doing, but it's hardly revolutionary. It can be reversed easily if it all depends on one man/one party being in power.

I don't disagree with you, but I think it's obvious the level of risk and turmoil involved in outright expropriation would be immense. There's nothing stopping the US and the opposition from crushing such efforts immediately.

[Sinister Cultural Marxist]

I guess one good short term way of dealing with inflation is by looting shops and dumping that supply on the market for free. That is, until those stores stop importing those goods.

This is the problem with mixed economies - sometimes it works alright to alleviate social ills without the blood and turmoil of a revolution, but when you're unlucky you just get stuck with the worst of both worlds.

[Rafiq]

Why doesn't he just fucking socialise the businesses?

Better, why doesn't he position the army there, and tell the workers to take the business and run it themselves?

I mean, I appreciate what he's doing, but it's hardly revolutionary. It can be reversed easily if it all depends on one man/one party being in power.

That would isolate Venezuela from the world capitalist order, it's failure would be inevitable.

[Crabbensmasher]

Oh, he wants to keep the capitalists in his country. That's why it's such a spontaneous attack.

Of course as a Social Democrat, he could just impose some 'progressive taxation' or something. So what if they make a 1000% profit, it will just be taken out of their pocket at the end of the day.
But you see, he doesn't, because that would scare off the businesses. He depends on them. Now if he does this every once in awhile, it gets them worried, but not enough to leave.

As for the inflation, yes, I guess that works, but it's such a haphazard way of doing it. Mixed economies like these seem like a total nightmare

[Tim Cornelis]

That is not a particularly smart move. The imposing of maximum prices has lead to shortages throughout Venezuela. In agriculture, the military has even seized crops which de-incentivises farmers from producing (reminiscent of War Communism which culminated in the 1921/22 famine). 'Parasitic' (exploitative) relations occur in production, and cannot be corrected through distribution. Excessive high prices is a problem but a problem within capitalism and an attempt to create a for-needs economy in a for-profit economic framework is bound to lead to economic downturns. Indeed, it constitutes economic mismanagement and, I think, it demonstrates that reformism is not a solution to capitalism.

I don't know enough about inflation, but I doubt it's a conspiracy of retailers and imperialists (especially given that inflation in Venezuela in the pre-Chavez era was higher:

http://img.photobucket.com/albums/v294/montages/venezuela_inflation_1991_2007.jpg

)


That would isolate Venezuela from the world capitalist order, it's failure would be inevitable.

Its*

[RevolucionarBG]

I don't disagree with you, but I think it's obvious the level of risk and turmoil involved in outright expropriation would be immense. There's nothing stopping the US and the opposition from crushing such efforts immediately.

:thumbup1:

[Vladimir Innit Lenin]

Sorry guys, I forgot that socialism makes us unpopular with the bourgeoisie. I forgot that they'll get angry if we try to act as socialists rather than social democrats. My bad.

[RadioRaheem84]

I'm still trying to understand how shortages and inflation happen in a country with a soc dem "revolutionary" leader who is extremely unpopular with the elite capitalists and opposition political class?

Is it really due to the polices of the soc dems in terms them being really unpopular and an actual economic war taking place, as did in Chile in 73?

Or is it really do to the market? Is it really an invisible abstract entity that reacts to policy?

[La Guaneña]

Oh I fucking wonder why the comprador bourgeoisie would wage economic war against the motherfuckers building national industries, supporting a native bourgeoisie and ending the dollar fest.


And Jesus Christ, can't you see that this means cutting of one of the main arguments of the reactionary Capriles-Media rightwing that "there is a shortage" when deposits are full of new, working shit? Oh yeah, let's a)expropriate the largely unexistant industry and the RETAIL, then causing real shortage, or just b)let the parasitic imperialist compradors keep on having fun and waging war by using the "shortage" against the administration.


Come on, give me a break.

[adipocere]

I suppose this story makes better copy in western media than this:
http://www.revleft.com/vb/violence-and-sabotage-t184805/index.html

[Tim Cornelis]

Sorry guys, I forgot that socialism makes us unpopular with the bourgeoisie. I forgot that they'll get angry if we try to act as socialists rather than social democrats. My bad.

This would actually be acting like social democrats. They attempt to compel the bourgeoisie in keeping their prices low, and not expropriate them.

[Ocean Seal]

That is not a particularly smart move. The imposing of maximum prices has lead to shortages throughout Venezuela. In agriculture, the military has even seized crops which de-incentivises farmers from producing (reminiscent of War Communism which culminated in the 1921/22 famine). 'Parasitic' (exploitative) relations occur in production, and cannot be corrected through distribution. Excessive high prices is a problem but a problem within capitalism and an attempt to create a for-needs economy in a for-profit economic framework is bound to lead to economic downturns. Indeed, it constitutes economic mismanagement and, I think, it demonstrates that reformism is not a solution to capitalism.

I don't know enough about inflation, but I doubt it's a conspiracy of retailers and imperialists (especially given that inflation in Venezuela in the pre-Chavez era was higher:

http://img.photobucket.com/albums/v294/montages/venezuela_inflation_1991_2007.jpg

)



Its*
Not that I understand shortages better than anyone else here, but it would seem to me that there is a difference between imposing a maximum price in agricultural products (which are a foundational part of the economy) and imposing a maximum price on a consumer good.

[Vladimir Innit Lenin]

Imposing maximum prices in agricultural products tends to be less effective: it just tends to piss peasants off because as food is the necessity of life, it has an inverse relationship with money. So if you impose a price that is too low, the peasants may decide to hoard their food. Or the peasant equivalent or whatever.

It's much more practical to impose price controls on consumer goods, since their intrinsic worth is so low (you can't eat an iPad) that their base price is probably far lower than agricultural produce.

[Canada]

So what if they make a 1000% profit, it will just be taken out of their pocket at the end of the day.

Do you believe anyone is making a tenfold profit reselling electronics there?

[Canada]

I'm still trying to understand how shortages and inflation happen in a country with a soc dem "revolutionary" leader who is extremely unpopular with the elite capitalists and opposition political class?


The popularity of the leader has nothing to do with it. The central bank simply issues more and more Bolivars and there is insufficient growth of goods in Venezuela to keep up. Money chases goods, bidding the price up. Foreign currency is just another good.

The government could intervene, as it does with gas, but it either cannot raise, or is unwilling to spend, enough foreign currency to stabilize the exchange rate. It does sell some USD at its official rate, but it's not enough to meet demand. Anyone not lucky enough to buy the subsidized USD will either have to go without them or offer a high enough price to convince someone else to sell.

As they can't force the rest of the world to use Bolivars, importers need foreign currency to buy goods. They buy foreign currency on the black market at the prevailing price. The unnamed retailer in the original article claims 60 Bolivar for a dollar. Wikipedia suggests the exchange rate is at least 40:1, so what the retailer claims doesn't sound unreasonable.

Why does Venezuela keep printing money when it is well aware of the effects of inflation on prices? To answer that let's look at how an exporter like PDVSA operates.

PDVSA extracts oil, practically giving some of it away to the locals and selling the rest internationally. It pays the local workers in Bolivars. The dollars it keeps for itself. The Bolivars to pay the workers must come from the central bank. There's no way PDVSA takes enough revenue in locally to cover costs. The central bank must simply create Bolivars out of thin air, thus the ever increasing volume of local currency bidding for the same amount of goods.

PDVSA could help the situation by selling all of its USD at low prices just as it does its gasoline. That would seem like the good socialist thing to do, but it doesn't want to do that. Then it would be stuck with a huge pile of unspendable Bolivars. Perhaps the people who run it prefer sitting on a huge pile of dollars which they can borrow against or otherwise leverage for their own gain.

Obviously what's happening in Venezuela is that some of its citizens are getting paid way more Bolivars than most, or they are getting some of the imported USD and selling it illegally. If this weren't the case then they wouldn't have businesses importing appliances, would they? Instead of admitting the massive decline in purchasing power the Venezuelan authorities blame greedy businesses/speculators for charging too much.

Note that exactly the same process goes on in China, but now China has built up enough foreign reserves that not only can it protect its own currency, it can destroy the US bond market if it so desired. And not only that, it has enough internal capacity that it doesn't need to care how many dollars it takes to buy a washing machine. Venezuela is just not in that position.

[Canada]

Not that I understand shortages better than anyone else here, but it would seem to me that there is a difference between imposing a maximum price in agricultural products (which are a foundational part of the economy) and imposing a maximum price on a consumer good.

Can you describe the difference? What would happen if there was a maximum price set for produce vs. cell phones? Let's say for the sake of argument the price was set to 50% of what the current prevailing prices are now.

[Die Neue Zeit]

Tim, that's a good graph, but if we're to traverse what you've said and expand it further, then Venezuela has economically mismanaged its oil resources since before Chavez. Artificially low gas prices have discouraged the upgrading of cars in that country, so one can see lots of 1970s models still.

[Rafiq]

In many cases, it is better to temporarily refrain from directly destroying the bourgeoisie (and petite bourgoeisie) when in positions of elected state power (That is, the bourgeois state has not been overthrown, but Communists are in control of it), and instead harass and repress them with state powers.

[ckaihatsu]

Note that exactly the same process goes on in China, but now China has built up enough foreign reserves that not only can it protect its own currency, it can destroy the US bond market if it so desired. And not only that, it has enough internal capacity that it doesn't need to care how many dollars it takes to buy a washing machine. Venezuela is just not in that position.


Good post, but I'm thinking that China doesn't have enough domestic demand for consumer goods to replace its current export-driven business. (This is typical capitalism -- the domestic workforce isn't paid enough wages for it to afford the premium goods they produce, so foreign markets are looked-to as the destination for those products, hence international trade competition, imperialism, and world war.)

[Canada]

In many cases, it is better to temporarily refrain from directly destroying the bourgeoisie (and petite bourgoeisie) when in positions of elected state power (That is, the bourgeois state has not been overthrown, but Communists are in control of it), and instead harass and repress them with state powers.

When is it better to refrain from destroying? When it is better to destroy? How does one know the difference?

[Rafiq]

When is it better to refrain from destroying? When it is better to destroy? How does one know the difference?

That's another question, whether communists running for election is a good thing in the first place.

[Creative Destruction]

I don't disagree with you, but I think it's obvious the level of risk and turmoil involved in outright expropriation would be immense. There's nothing stopping the US and the opposition from crushing such efforts immediately.

The Venezuelan government outrightly expropriates shit all the time. They don't give a fuck. They just last year took over a concrete plant and several other industrial companies. I don't know why they just don't socialize agricultural and food production already or pass a law requiring all privately held companies be converted to worker collectives.

What Maduro here did is just grandstanding. It's starting to become the only thing that the Venezuelan government does and it's getting extremely aggravating because they have the political support to actually socialize these things. What's the opposition going to do? Attempt another coup? We know how well that worked out for them last time.

[Rusty Shackleford]

Sorry guys, I forgot that socialism makes us unpopular with the bourgeoisie. I forgot that they'll get angry if we try to act as socialists rather than social democrats. My bad.

at the same time the venezuelan government is attempting to build a second power (in a way) in the country.



http://venezuelanalysis.com/news/10135

ive fallen out of the loop on venezuela in general but stuff like this and others are good moves within the constraints of commanding a bourgeois state politically.



Imposing maximum prices in agricultural products tends to be less effective: it just tends to piss peasants off because as food is the necessity of life, it has an inverse relationship with money. So if you impose a price that is too low, the peasants may decide to hoard their food. Or the peasant equivalent or whatever.

It's much more practical to impose price controls on consumer goods, since their intrinsic worth is so low (you can't eat an iPad) that their base price is probably far lower than agricultural produce.

also the Mexican state maintained higher prices, iirc, on agricultural goods up until NAFTA that actually maintained the peasant and agricultural communities relatively well. that was also maintained by a non-revolutionary government. (also communal ownership of agricultural land)

[Canada]

Good post, but I'm thinking that China doesn't have enough domestic demand for consumer goods to replace its current export-driven business. (This is typical capitalism -- the domestic workforce isn't paid enough wages for it to afford the premium goods they produce, so foreign markets are looked-to as the destination for those products, hence international trade competition, imperialism, and world war.)

I'm not so sure about that. There is plenty of demand. Like everyone else, Chinese people want to live in comfort. It is Chinese monetary policy that denies so many of them access to the simple luxuries we take for granted.

Maintaining the currency peg destroys the purchasing power of the Chinese worker to protect the purchasing power of the American worker. It's a straight transfer of wealth from China's lower and middle class to America and its vassals. The Chinese manufacturing industry's ownership is on the winning side of the transaction, because they receive dollars. They must be a very powerful lobby.

[ckaihatsu]

I'm not so sure about that. There is plenty of demand. Like everyone else, Chinese people want to live in comfort. It is Chinese monetary policy that denies so many of them access to the simple luxuries we take for granted.

Maintaining the currency peg destroys the purchasing power of the Chinese worker


Well, to clarify, then, which is it -- that Chinese workers do have enough purchasing power to replace current foreign demand, or not -- ?





Maintaining the currency peg destroys the purchasing power of the Chinese worker to protect the purchasing power of the American worker. It's a straight transfer of wealth from China's lower and middle class to America and its vassals.


This is a strong argument for the Third Worldist position -- that workers in imperialist countries *do* actually benefit from the exploitation of workers in Third World countries. (Though it has to be manifested in consumer spending, and as a class there's no difference, regardless.)





The Chinese manufacturing industry's ownership is on the winning side of the transaction, because they receive dollars. They must be a very powerful lobby.

[Czy]

Their hyperinflation is obviously destroying the purchasing power of workers, but as a point of interest check the effect on the stock exchange. The Caracas Stock Exchange has climbed like a hiker navigating a mesa.

Who's benefiting? Speculators, investors and the bourgeois bogeyman.

Monetary policy is a devastating policy used by the bourgeois. They can wipe out workers' purchasing power and further their own interests with the snap of a finger. I call monetary policy a financial weapon of mass destruction.

But as is the case in Venezuela, speculators can hold the country hostage at gun-point so damn easily.

[Canada]

Well, to clarify, then, which is it -- that Chinese workers do have enough purchasing power to replace current foreign demand, or not -- ?


Chinese workers have limited purchasing power because the majority of the country's US export income over the last 40 years has been recycled back to the US treasury, effectively converting US deficit spending into RMB devaluation. The process is often called "exporting inflation".

China could discontinue this policy at any time, and gradually they seem to be preparing to do so. Sovereign wealth funds have been chartered to purchase strategic assets around the world. Deal sizes range from under 10 million dollar Series B equity purchases to high profile takeovers of market leaders. They've eased capital controls, enabling ordinary Chinese to get in on some of the action. They've sharply increased their holdings of short term US debt while reducing their long term holdings. China has consistently signed bilateral trade deals and entered into significant currency swap agreements over the past few years.



This is a strong argument for the Third Worldist position -- that workers in imperialist countries *do* actually benefit from the exploitation of workers in Third World countries. (Though it has to be manifested in consumer spending, and as a class there's no difference, regardless.)

Yes, of course all American workers (and workers around the world who are paid in dollars) benefit from this arrangement. The workers who benefit the most are the ones in the employ of the federal government. The American elite also benefits, both bureaucrats and captains of industry.

If forcefully taking the fruits of labor from one person and giving to another isn't exploitation, I don't know what is. It's interesting to note that a position equivalent to Third Worldism (as defined by Wikipedia) is held by the AnCap/Rothbardian/Austrian crowd. The way it's framed is that sooner or later the Chinese worker is going to make their government stop subsidizing the dollar with their earnings. When that happens the purchasing power of the dollar will be significantly reduced, causing serious harm to the living standards of the average American. If the cost of a decent toothbrush went from $2.50 to $7.50 the ultra rich won't suffer much, but someone living on $50,000 per year will experience some very unpleasant downward mobility.

I don't understand what you mean by your remark in parenthesis.

[Canada]

Their hyperinflation is obviously destroying the purchasing power of workers, but as a point of interest check the effect on the stock exchange. The Caracas Stock Exchange has climbed like a hiker navigating a mesa.


Inflation has a tendency to cause bubbles in investment class assets.



Who's benefiting? Speculators, investors and the bourgeois bogeyman.


Speculation is more of a zero sum game than other market activities. Some speculators will win and others will lose. Yes, some of them greatly benefit. In the case of commodities markets a significant amount of that benefit is siphoned off others who bought for utility and were forced to pay a higher price because speculators bid it up.

What's the difference between an investor and a speculator? The investor puts savings into something in order to increase its value to sell it at a higher price in the future. The investor doesn't really benefit from inflation. Inflation drives speculation, which distorts prices. Prices are signals to investors. If the price of something is in an upward trend then it's a good idea to invest savings in producing more of that thing. The problem is when speculators realize they have bid up the price higher than the real market for that thing can pay they dump it. The price crashes. Those invested in producing whatever that is suffer losses. Valuable resources were wasted.

I'm not exactly sure how to define who the bourgeois bogeyman is. Major beneficiaries of inflation are governments doing the inflating, those employed by said governments (to the extent they can organize to negotiate anyway), and most of all the financial sector. Or as I like to call them, the banksters.

Generally, the speculators who win are the banksters. After all, they not only have the privilege of printing the money, they set monetary policy. They have the privilege of loaning the same money to many borrowers at the same time; an act that for anyone else is considered fraud. Who gets access to credit and who doesn't is at their discretion. And as if that wasn't enough, running the major exchanges and keeping the balances of nearly every market participant bestows a sort of financial omniscience. Our dealings are as transparent to them as their dealings are opaque to us.

[Canada]

China could discontinue this policy at any time, and gradually they seem to be preparing to do so.

This is big news I just noticed:

"The People's Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan's appreciation."

My status doesn't allow me to post links, but the headline on bloomberg.com is "PBOC Says No Longer in China's Interest to Increase Reserves" and the article is dated November 20, 2013.

[ckaihatsu]

Chinese workers have limited purchasing power because the majority of the country's US export income over the last 40 years has been recycled back to the US treasury, effectively converting US deficit spending into RMB devaluation. The process is often called "exporting inflation".

China could discontinue this policy at any time, and gradually they seem to be preparing to do so. Sovereign wealth funds have been chartered to purchase strategic assets around the world. Deal sizes range from under 10 million dollar Series B equity purchases to high profile takeovers of market leaders. They've eased capital controls, enabling ordinary Chinese to get in on some of the action. They've sharply increased their holdings of short term US debt while reducing their long term holdings. China has consistently signed bilateral trade deals and entered into significant currency swap agreements over the past few years.



Yes, of course all American workers (and workers around the world who are paid in dollars) benefit from this arrangement. The workers who benefit the most are the ones in the employ of the federal government. The American elite also benefits, both bureaucrats and captains of industry.

If forcefully taking the fruits of labor from one person and giving to another isn't exploitation, I don't know what is. It's interesting to note that a position equivalent to Third Worldism (as defined by Wikipedia) is held by the AnCap/Rothbardian/Austrian crowd. The way it's framed is that sooner or later the Chinese worker is going to make their government stop subsidizing the dollar with their earnings. When that happens the purchasing power of the dollar will be significantly reduced, causing serious harm to the living standards of the average American. If the cost of a decent toothbrush went from $2.50 to $7.50 the ultra rich won't suffer much, but someone living on $50,000 per year will experience some very unpleasant downward mobility.


Yes.





I don't understand what you mean by your remark in parenthesis.





This is a strong argument for the Third Worldist position -- that workers in imperialist countries *do* actually benefit from the exploitation of workers in Third World countries. (Though it has to be manifested in consumer spending, and as a class there's no difference, regardless.)


I'm making a distinction between the workers-of-the-world's objective interests *as a class*, and their varying purchasing power as *consumers*, by national division.

[Czy]

Inflation has a tendency to cause bubbles in investment class assets.

Correct. This is a case of excessive monetary liquidity in the financial system - which has made Venezuelan markets vulnerable to volatile asset price inflation caused by (leveraged) speculation.


Speculation is more of a zero sum game than other market activities.

Precisely. But the entire financial sector creates no value - it simply makes money out of thin air, leading to liquidity/malinvestment more often than not.


Generally, the speculators who win are the banksters.

This is the key point I was making. When inflation destroys workers' purchasing power (and causes shortages and whatnot), banksters can ride high.

Inflation hurts savings but helps borrowers, speculators and those involved in arbitrage/speculation. Rings a bell, eh - cue memories of the 07 crisis, which is far from over (structurally).

Same with the European debt crisis.

[Greek Warrior]

Maduro is doing the right thing.
He does not socialize the business because that would isolate the country from the rest of the world, as another comrade said. Also, there would be a high risk of imperialist US interference in Venezuela politics.
Go on, comrade Maduro!

[Canada]

I'm making a distinction between the workers-of-the-world's objective interests *as a class*, and their varying purchasing power as *consumers*, by national division.

Can you elaborate on that? What's your take on the common and conflicting interests of American and Chinese workers?

[Canada]

the entire financial sector creates no value - it simply makes money out of thin air, leading to liquidity/malinvestment more often than not.


While I agree with your sentiment in general, I wouldn't go so far as to say the entire financial sector creates no value whatsoever.

Prudently investing savings is difficult and often specialized work. Loaning money at interest to, or purchasing equity in, any business that creates wealth by engaging in strictly voluntary, mutually beneficial exchanges is a legitimate activity. As long as there are no special privileges involved, it's hardly different from farming or manufacturing. Both parties to such transactions have equal opportunity to benefit or suffer. Outcomes can be two winners, two losers, or a winner and a loser.

Accountants and financial analysts are definitely workers, and I believe investors as I'm about to define them are workers as well.

Let's say a farmer takes his savings and either loans it at interest, or buys a stake in another farm.

Now the farmer is part of the financial sector. Even if he quits farming himself, he's still worker because he has to carefully watch out for his investment by constantly analysing its performance and intervening to keep in on track. It doesn't really matter if the farmer has all his money in a single investment that he spends all his time watching or if he invests in many different opportunities which he only scrutinizes occasionally. Either way, it's still work. If the work isn't done, the investment will be lost just as surely as a farmer won't reap what he doesn't sow. The same is true for investors in farms who've never been farmers themselves. Selecting for success is hard work, and anyone who does it successfully benefits us all and deserves to be rewarded.

The other valuable contribution of the financial sector is the provision of facilities to store and quickly transfer money. After all, money is just another commodity. Guarding it is work. Keeping correct ledgers is work. Moving money to where it's needed is work.

I don't see anything exploitive about that, do you?

Exploitation occurs when everyone is forced by law to use a certain currency, trade exclusively through a certain exchange, and so forth. Exploitation can arise in other circumstances of course, but it always seems to occur in cases of legally enforced financial sector monopolies. In these cases the party with special privileges never loses even when losses are fully deserved. Both parties can still win, but the privileged party makes someone else pay for its losses without ever being punished for fraud.



Inflation hurts savings but helps borrowers, speculators and those involved in arbitrage/speculation. Rings a bell, eh - cue memories of the 07 crisis, which is far from over (structurally).

Same with the European debt crisis.

I don't believe the crisis is really over either. Just because DJIA is at new highs doesn't mean resource allocation is best aligned with widespread happiness. And I wouldn't be surprised to find central banks secretly intervening in the stock markets by directly purchasing them to create liquidity for favoured institutional investors.

[ckaihatsu]

I'm making a distinction between the workers-of-the-world's objective interests *as a class*, and their varying purchasing power as *consumers*, by national division.





Can you elaborate on that? What's your take on the common and conflicting interests of American and Chinese workers?


Sure -- again, note that the distinction is only manifested -- via national identity -- in the realm of *consumption*, when workers are looking to exercise purchasing power within the bourgeois, capitalist system.

So, no matter what nations workers happen to be in, their *class* interests remain intact -- since it's only as *workers* that they / we have the potential to control the world's social productivity on a *collective* basis.

So *this* argument cuts *against* the Third Worldist position which maintains that First World workers benefit from the (hyper-)exploitation of Third World workers. First World workers do *not* have any special status separate from the working class interests they have in common with Third World workers.

[ckaihatsu]

While I agree with your sentiment in general, I wouldn't go so far as to say the entire financial sector creates no value whatsoever.

Prudently investing savings is difficult and often specialized work. Loaning money at interest to, or purchasing equity in, any business that creates wealth by engaging in strictly voluntary, mutually beneficial exchanges is a legitimate activity. As long as there are no special privileges involved, it's hardly different from farming or manufacturing. Both parties to such transactions have equal opportunity to benefit or suffer. Outcomes can be two winners, two losers, or a winner and a loser.

Accountants and financial analysts are definitely workers, and I believe investors as I'm about to define them are workers as well.


While financial management is often professionalized, separate from capital ownership itself, and paid a regular wage / salary, the duties of ownership are *diametrically opposite* to the interests of workers since the creation of wealth only comes about from the *exploitation* of labor.


[11] Labor & Capital, Wages & Dividends

http://s6.postimage.org/f4h3589gt/11_Labor_Capital_Wages_Dividends.jpg (http://postimage.org/image/f4h3589gt/)





Let's say a farmer takes his savings and either loans it at interest, or buys a stake in another farm.

Now the farmer is part of the financial sector. Even if he quits farming himself, he's still worker because he has to carefully watch out for his investment by constantly analysing its performance and intervening to keep in on track.


No, he's an *owner*, of capital.





It doesn't really matter if the farmer has all his money in a single investment that he spends all his time watching or if he invests in many different opportunities which he only scrutinizes occasionally. Either way, it's still work. If the work isn't done, the investment will be lost just as surely as a farmer won't reap what he doesn't sow.


In *both* cases -- whether the investment is purely financial or is an investment into farm productivity -- the person is an *owner* looking out for the interests of capital. The only variation is the *amount* of capital being invested.

(The duties of capital ownership is *not* 'work' because the owner is exercising capital -- built-up, or 'dead' labor -- instead of having to sell their own labor power for a wage.)





The same is true for investors in farms who've never been farmers themselves. Selecting for success is hard work, and anyone who does it successfully benefits us all and deserves to be rewarded.


Any liberal, libertarian, centrist, or conservative could have made this statement. There's nothing revolutionary about it whatsoever.





The other valuable contribution of the financial sector is the provision of facilities to store and quickly transfer money. After all, money is just another commodity. Guarding it is work. Keeping correct ledgers is work. Moving money to where it's needed is work.

I don't see anything exploitive about that, do you?

Exploitation occurs when everyone is forced by law to use a certain currency, trade exclusively through a certain exchange, and so forth. Exploitation can arise in other circumstances of course, but it always seems to occur in cases of legally enforced financial sector monopolies. In these cases the party with special privileges never loses even when losses are fully deserved. Both parties can still win, but the privileged party makes someone else pay for its losses without ever being punished for fraud.


Your understanding of 'exploitation' here can be described as 'overbearing economic nationalism', or 'favored status within the industry', respectively -- the Marxist / revolutionary understanding is this:





In Marxian economics, exploitation refers to the subjection of producers (the proletariat) to work for passive owners (bourgeoisie) for less compensation than is equivalent to the actual amount of work done. The proletarian is forced to sell his or her labour power, rather than a set quantity of labour, in order to receive a wage in order to survive, while the capitalist exploits the work performed by the proletarian by accumulating the surplus value of their labour. Therefore, the capitalist makes his/her living by passively owning a means of production and generating a profit, when instead the labor should be entitled to all it produces.




http://en.wikipedia.org/wiki/Exploitation





I don't believe the crisis is really over either. Just because DJIA is at new highs doesn't mean resource allocation is best aligned with widespread happiness. And I wouldn't be surprised to find central banks secretly intervening in the stock markets by directly purchasing them to create liquidity for favoured institutional investors.


What's happening is that there's a bubble in equities -- the stock market -- due to the cheap funds (almost zero-percent interest) being made available by The Fed. This is an ongoing, indefinite extension of 'quantitative easing', or liquidity, in lieu of real economic growth (GDP).

[Czy]

Another dazzling post, ckaihatsu.

Because of QE, there is excessive monetary liquidity in the financial system, which has induced lax or inappropriate lending standards by the banks, which has made markets vulnerable to volatile asset price inflation.


I wouldn't go so far as to say the entire financial sector creates no value whatsoever.

The FS is based on fiat money and fractional reserve banking. Fake money is created, and shuffled around, creating no value whatsoever.

Let's take a small scale example. A milk company uses a hedging strategy to try and maximize profits. It arranges a futures contract with a bottling company, to buy a specified amount of bottles for a specified sum (on a specified date). Due to fluctuations in the dollar/inflation/etc one party wins and one loses. How did this create any value? On the large, macro scale, imagine large banks betting billions of dollars through credit default swaps/interest rate swaps/insanely large futures contracts to do with oil and whatnot. This abstract hedging can cause certain industries to topple while no value was created.

E.g: George Soros' hedgefund sold short more than $10 billion in pounds in 1992, profiting from the UK government's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency. Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound, earning Soros an estimated $1.1 billion. The UK Treasury estimated the cost of Black Wednesday at £3.4 billion.

Casino decadence - fucking over ordinary people.

[ckaihatsu]

Another dazzling post, ckaihatsu.

Because of QE, there is excessive monetary liquidity in the financial system, which has induced lax or inappropriate lending standards by the banks, which has made markets vulnerable to volatile asset price inflation.


No biggie -- my source:


How the stock market might not reflect the current economy

www.youtube.com/watch?v=TaZ9z4wZU18

[WilliamGreen]

There is a good dream in here.

What if the people learned that they can seize shops.

;)