Following up on a prediction

[Martin Blank]

Last September, in a discussion with someone in OI (http://www.revolutionaryleft.com/index.php?showtopic=39980&view=findpost&p=1291936106), I wrote the following:


Originally posted by [email protected] 12 2005, 11:56 PM
But I think that little of that matters, though. Looking at the economic situation in the U.S. today, there is a real likelihood that the bottom is going to drop out of the economy sometime within the next eight or nine months, and that will change the alignments of all classes -- bourgeois, petty bourgeois and proletarian. The economic rollercoaster that most working people in the U.S. will be forced to ride will shake up most of their conceptions of what is possible and what is impossible. "All that is holy is profaned. All that is solid melts into the air."

Now, it's not often that you'll actually see a communist make an outright prediction. But I felt it was necessary to make this one, for two reasons: first, to push the issue that the economic situation in the U.S. was not going to improve, but worsen; and, second, to see if our method of analysis (materialist dialectics) was able to predict (as opposed to what the vultures of bourgeois ideology say, which is that it is impossible).

Economic indicators from May 2006 (eight months after the prediction) to today have confirmed this prediction. For us, the main indicator for how this was going to start was credit. A good expression of this indicator is the housing market. This is where credit finds its greatest ability to expand in the internal market. Since May, the bottom has fallen out of the housing market. Take new housing sales, for example. According to government numbers, sales of new houses have fallen exponentially compared to one year ago over the last three months for which they have figures.

http://www.communistleague.org/images/Table-1.gif

The freefall (as Paul Ashworth, chief U.S. economist at Capital Economics) in the housing market is already compelling the government to find ways to prop up the credit system. The recent decision by the Federal Reserve to not raise interest rates -- which means that the cirulation of money and credit will not be further shrunk -- is a sign of how this is already beginning to affect the overall economy.

According to a report (http://observer.guardian.co.uk/print/0,,329562511-102271,00.html) in the Sunday Observer (UK), this drop in the housing market will likely mean that 73,000 jobs will be cut every month for the next year in the U.S. from the housing construction industry alone.

Another key expression of the crisis in the credit system is seen in the recent move by Ford Motor Company to spin off Ford Credit, the main financing company for purchasers of new Ford vehicles. According to a report (http://www.detnews.com/apps/pbcs.dll/article?AID=/20060826/AUTO01/608260371/1148) in yesterday's Detroit News, Ford Credit's earnings fell 40 percent in the second quarter of 2006, mostly due to the rise in interest rates over the last period, as well as the worsening economy. The chief investor in Ford Credit is Citicorp, a cornerstone for American finance capital.

At the same time, Ford is also cutting production by 21 percent from last year, and management is currently considering a massive buyout package similar to what General Motors and Delphi offered their workers earlier this year.

I will let comrades determine for themselves if this prediction was, in fact, accurate. I will also let comrades make up their own minds as to whether this is a concrete counter to the arguments of the bourgeois ideologists about the validity of materialist dialectics. I think the facts speak for themselves.

Miles

P.S.: Apologies if this is in the wrong forum. I thought that Politics would be best for it.

[Leo]

Very interesting...


Apologies if this is in the wrong forum. I thought that Politics would be best for it.

I would say that this thread belongs to theory.


I will let comrades determine for themselves if this prediction was, in fact, accurate. I will also let comrades make up their own minds as to whether this is a concrete counter to the arguments of the bourgeois ideologists about the validity of materialist dialectics.

It seems to me that the prediction was accurate, however I really fail to understand how dialectics was used for this. After all, this prediction was economical, not philosophical, and it seems to me that it took a clear analysis of the economical situation, not a dialectical approach.

[Martin Blank]

Originally posted by Leo [email protected] 27 2006, 04:13 AM
It seems to me that the prediction was accurate, however I really fail to understand how dialectics was used for this. After all, this prediction was economical, not philosophical, and it seems to me that it took a clear analysis of the economical situation, not a dialectical approach.
One of the key aspects of doing this analysis is working out the dynamics of development -- not just plotting points, but analyzing the interrelationships among elements, how they influence each other and how the contradictions among them shape their motion.

To understand what has happened is a general economic analysis; to see where they were going requires an ability to "telescope" those dynamics forward over a given period of time -- in this case, nine months. Remember, the "looking back" aspect to this (historical materialist analysis) is meant to show how the "looking forward" (dialectical materialist analysis) was proven correct.

When we had this discussion in the Central Committee last September, it was credit that we saw as the focal point of these contradictions, and we based our "telescoping" on how we saw this dynamic developing over the next period. This is where the value of dialectics came in -- being able to see that a confluence of opposing and contradictory elements would come together eight to nine months down the line, causing a crisis in the credit system (a crisis that bourgeois economists are now saying could lead to an economic downturn worse than the dot-com crash, which is implied in the statement made last September).

* * *

In general, I would agree with you about this needing to be in Theory or Philosophy, but we are now past abstractions, and are dealing with concrete reality. If there was an Economics forum, I would suggest it go there. However, there is no such forum, so I think that Politics is the best place to be.

Miles

[Leo]

In general, I would agree with you about this needing to be in Theory or Philosophy, but we are now past abstractions, and are dealing with concrete reality. If there was an Economics forum, I would suggest it go there. However, there is no such forum, so I think that Politics is the best place to be.

The reason I said this should be in Theory was because when I proposed and Economics forum, they said it belonged to Theory :rolleyes: . Oh well, it's ok in politics as well.


One of the key aspects of doing this analysis is working out the dynamics of development -- not just plotting points, but analyzing the interrelationships among elements, how they influence each other and how the contradictions among them shape their motion.

To understand what has happened is a general economic analysis; to see where they were going requires an ability to "telescope" those dynamics forward over a given period of time -- in this case, nine months. Remember, the "looking back" aspect to this (historical materialist analysis) is meant to show how the "looking forward" (dialectical materialist analysis) was proven correct.

When we had this discussion in the Central Committee last September, it was credit that we saw as the focal point of these contradictions, and we based our "telescoping" on how we saw this dynamic developing over the next period. This is where the value of dialectics came in -- being able to see that a confluence of opposing and contradictory elements would come together eight to nine months down the line, causing a crisis in the credit system (a crisis that bourgeois economists are now saying could lead to an economic downturn worse than the dot-com crash, which is implied in the statement made last September).

So I if I understood correctly, first you examined the developments in the past, from this examination you had an idea on the dynamics of development and gained a vision, and with this vision you thought credit was the focal point of contradiction among the dynamics of development, and you based your prediction of the dynamics of development on credit and reached a conclusion on how things will turn out by carefully calculating a confluence of opposing and contradictory elements and your conclusion turned out to be correct. But still I fail to see how dialectics was used. If I understood correctly you used it while predicting, but how did you use it?

[Amusing Scrotum]

A similar prediction, from March 02, 2005:


Originally posted by Steve Maich
....the United States of America's public finances are a shambles. They're getting rapidly worse. And if something major isn't done soon to solve the country's intractable budget problems, the world will face an economic shakeup unlike anything ever seen before.

[....]

And the stakes are almost inconceivable for a generation of politicians and voters raised in relative prosperity, who've never known severe economic hardship. But that plush North American lifestyle to which we've all grown accustomed has been bought on credit, and the bill is rapidly nearing its due date. If the United States can't find a way to pay up, the results will spill beyond national borders, spreading economic misery far and wide. In Canada, the country whose financial well-being is most tightly tied to trade with the U.S., there wouldn't be a single region or industry left untouched by a fiscal shock south of the border.

[....]

The U.S. is heading for a massive demographic shift as baby boomers start retiring in three years. As they do, the costs of providing social programs and health care are going to soar.

[....]

At a recent meeting with fund managers in Boston, Roach said he believes there is a 90 per cent chance the country's rampant borrowing will eventually lead to a disaster for the economy.

[....]

History provides some harrowing examples of what happens when an economy collapses under the weight of unsustainable debt. One of the most chilling is Argentina in 2001.

....As unfathomable as it may seem, most economists think something like that could happen in the United States. "If foreign investors look at the long-run outlook for the federal budget and decide there is going to be a crash, you get a financial panic," Bivens explains. "Interest rates spike. That causes a huge recession. You'll have the dollar falling fast, so maybe inflation is sparked at the same time." And if interest rates spike, that would squeeze millions of U.S. consumers who have taken out loans against the rising value of their homes in recent years. A sudden hit to the real estate market would further constrain consumers' wallets, leading to a cycle of lower spending, and deeper recession, Bivens says.

[....]

And this insane behaviour is a huge problem for everyone else because of America's importance to the world economy. Literally millions of workers in Canada, the U.K., Germany, Japan and elsewhere are directly or indirectly reliant on a healthy U.S. market for their jobs. [....] Accordingly, most economists agree that a severe downturn in the United States would drag the rest of the world down with it. "If a country as big as the U.S. gets sick, everybody's gonna get sick," says Bivens.

[....]

....it seems clear the standard of living that millions of Americans have come to take for granted will have to change.

Is America going broke? (http://www.macleans.ca/topstories/world/article.jsp?content=20050307_101541_101541)

In my opinion, that's a rather long-winded, and bourgeois, way of saying what you did: "But I think that little of that matters, though. Looking at the economic situation in the U.S. today, there is a real likelihood that the bottom is going to drop out of the economy...."

This article (http://www.studien-von-zeitfragen.de/Zeitfragen/Collapse_in_2005_/collapse_in_2005_.html) and this article (http://business.timesonline.co.uk/article/0,,16849-1752866,00.html) seem to be arguing something similar, though I only skimmed through them. The date given for the collapse in the first article, differs from yours....but I suppose if this was a general trend, then their prediction would be accurate as well.

I could find other articles, there seem to be plenty out there, but the point is without using "materialist dialectics", these folks seem to have made similar predictions to yourself. Which would cast doubt on the validity of your method. After all, the guy who writes Economic Editorials for The Independent, Hamish something, has also made similar comments in the past, yet I really doubt he uses "materialist dialectics" as a "method of analysis".

I mean, whilst we're on the subject of predictions, I made one the other day. I predicted that Arsenal wouldn't win against Manchester City....and my prediction turned out to be correct. What's more, the result also showed the dangers of playing a right footed player at left back....because someone who was naturally left footed probably wouldn't have made the rash challenge that Hoyte did. But that's another discussion....

Additionally, I could make more predictions about the current Premiership season. Thierry Henry, for instance, will finish top goalscorer once again despite the challenges from Chelsea's 30 million dynamo and Bobby "the bullet" Zamora. That prediction would be based on 19 years of accumulative knowledge about Professional football.

You, I suspect, don't have a great interest in football....or "soccer". After all, the fate of the Lions or Tigers is likely your specialist Sports field. So, if you were asked to make some predictions about the current Premiership season, you may well tip Everton for the League Title and Emile Heskey to be the leading scorer. And your prediction would fall flat on its face.

On the other hand, as far as I can see, you seem to have a very good knowledge of the workings of capitalist economies and their potential shortfalls. Therefore, you can make insightful (and accurate) predictions about what may or may not happen....as is the case with your prediction from September 12, 2005.

And the point that I'm babbling towards? Well, as far as I can see, the accumulation of data and the general competence said accumulation requires, seems to be, as far as I can see, far more important than the framework in which said data is interpreted. After all, having bricks in the first place is far more important than the decision concerning whether one uses a Stretcher or a Flemish bond. If you get my point.

Though, that being said, I would be very interested to see an in-depth outline of how exactly you used "materialist dialectics" to come to your prediction. That is, how exactly you used those [in]famous dialectical laws whilst interpreting the data you accumulated. Maybe if minutes were kept during the discussion in the Central Committee last September, you could post an edited version of said minutes which clarifies exactly how you used "materialist dialectics" (why that term and not dialectical materialism?) to make your prediction?

[Severian]

Originally posted by CommunistLeague+Aug 27 2006, 02:19 AM--> (CommunistLeague @ Aug 27 2006, 02:19 AM) Last September, in a discussion with someone in OI (http://www.revolutionaryleft.com/index.php?showtopic=39980&view=findpost&p=1291936106), I wrote the following:


[email protected] 12 2005, 11:56 PM
But I think that little of that matters, though. Looking at the economic situation in the U.S. today, there is a real likelihood that the bottom is going to drop out of the economy sometime within the next eight or nine months, [/b]
The rest of your post hardly shows that the bottom has dropped out of the economy (one year after your prediction.) At most, it amounts to indications that it might do so in the future. The decline in housing starts is significant.

But as far as the overall state of the economy right now? The latest news: apparently unemployment declined slightly this month. (http://www.thestandard.com.hk/news_detail.asp?pp_cat=22&art_id=26000&sid=9620343&con_type=1) Manufacturing expanded. The economy grew - slowly. Anyway, not a recession.

If you could accurately guess the timing of economic downturns, then you could make a fortune in the financial markets. (Give it to the movement if you want, like that retired miner in Germany, who you posted an article about.) Plenty of people try to do this professionally without any success - economists are notoriously bad at making predictions.


Now, it's not often that you'll actually see a communist make an outright prediction.

I make predictions from time to time on this board, usually sucessfully. But not about the timing of economic developments.

(For example, Flyby and I had counterposed predictions over whether the CPN(Maoist) was "on the verge of taking power." Clearly I was right and she was wrong about that.)