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The Financial Zoo: An Interview with Satyajit Das – Part II

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Satyajit Das is an internationally respected expert on finance with over 30 years working experience in the industry. He is also a best-selling author and a regular contributor to leading finance blogs – including our very own Naked Capitalism. His new book ‘Extreme Money: Masters of the Universe and the Cult of Risk’ is out now and available from Amazon in hardcover and Kindle versions.

Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland.

Part I of the interview can be read here.

Philip Pilkington: In the book you describe ‘money shows’ which are presentations where financiers try to flog their wares to the general public. It really struck me how sleazy these shows are; like something out a carnival sideshow. Salesmen — you know, proper ‘snake oil’ salesmen — stand in front of a crowd and whip them into a frenzy, convincing them that they can all get rich.

I almost found the whole thing quite funny – that is, until I realised that many of these people were just trying to make ends meet. It’s well-known that real wages have stagnated in the last 30 years. And at the same time the financial markets have greatly expanded. These ‘money shows’ seemed to me to be the meeting point of these two toxic phenomena. Perhaps you could talk a little about this?

Satyajit Das: A carnival sideshow is an apt description. But, for me there is also a great sadness. As you correctly identify people became exposed to very complex economic forces – their wages stagnated; the state reduced their benefits – and financialization forced ill-equipped people to try to plan for retirement. At the same time there was enormous social pressure refracted by the media to improve living standards, consume recklessly and get the latest ‘must haves’.

People borrowed to finance consumption or resorted to financial speculation to offset declining income and safeguard their future, increasingly with borrowed money. Home equity – the difference between the current value of the family home and the amount owed on it – provided the initial financial stake. The Money Shows among other things tapped into this. Financial institutions exploited this vulnerability with their products and their marketing. As things like outsourcing and off shoring put greater and greater pressure on jobs and incomes, the entire process accelerated. George Bernard Shaw wrote about this connection between speculation and wealth: “Gambling promises the poor what property performs for the rich, something for nothing.”

The French philosopher Michel Foucault identified a carceral continuum, a system of cruelty, power, supervision, surveillance and enforcement of acceptable behavior affecting working people and their domestic lives. Modern finance evolved into a social control system. People became wage slaves, and then they became debt slaves – money especially evolved into a mechanism for control.

But it wasn’t only the less well off who embraced debt and speculation. The rich also indulged. The reasons were not that different, but just at a different level. Even if you have a lot you don’t have ‘enough’. There is huge insecurity – even for ‘successful’ bankers. There is enormous social pressures for big houses, trophy partners, kids in private schools, expensive holidays and so on. As you go up the food chain, the pressures actually increase – he has private jet, I don’t. He has a Gulfstream 5, I only have a Gulfstream 3 etc. It’s fascinating process – so everyone finds themselves deeper and deeper in debt and speculation.
The Sociologist Zygmunt Bauman’s metaphor of liquid and solid modernity captures the shift from a society of producers to a society of consumers. Security gives way to increased freedom to purchase, to consume and to enjoy life. In liquid modernity, individuals have to be flexible and adaptable, pursuing available opportunities, calculating likely gains and losses from actions under endemic uncertainty. It was a metaphor for the rise of financiers and the financialization of everyday life in a volatile world where risk taking and speculation was an essential survival strategy.

PP: It seems that, in many ways, we’ve entered another age of ‘conspicuous consumption’ – that is, consumption for the sake of displaying power and wealth. As you probably know, the economist Thorstein Veblen coined the turn at the beginning of the 19th century. Soon after consuming conspicuously fell out of fashion even with the rich – after the term became popular as a derogatory expression they stopped building giant gilded mansions for fear that they might be labelled as consuming conspicuously and hence being unfashionable. But some claim there was also a class dimension to this. This was a time when trade unionism and socialism were on the rise and the rich may have thought it more opportune to tone down expressing their wealth.

One can’t help but see a class dimension to what you’ve just said. While in the 80s and 90s people were playing down the notion of social class, actual class divisions were becoming increasingly pronounced. Now we’re in a curious – and somewhat unique – historical situation where, due to their not earning sufficient wages to keep pace with productivity increases, working people have to go into debt just to consume enough to keep the whole system ticking over at full capacity.

You were, in many ways, at the center of the mechanism for reinforcing these unusual dynamics – that is, global finance. What do you make of this unbalanced moment in history? Is Big Finance just an arm to facilitate major imbalances in wealth distribution? Is it any more than that?

SD: Class is a loaded term; it has connotations of inherited wealth, privilege, education, inflexible social delineation and lack of mobility. It means different thing to different people. There were the ‘Ivy league’ and Oxbridge set. But many people in finance came from modest backgrounds – the PSDs poor, smart and driven to do well. The social dynamic at work is more complex than class.

It is about ‘haves’ and ‘have nots’; many of latter were became ‘have not paid for what they haves’. It was about having a peculiar skill set that allowed you to position yourself in the centre of this extraordinary change. If you were at the right place in this ‘unbalanced moment of history’, as you call it, you could earn disproportionate rewards for your efforts and have considerable power. Those who didn’t have this set of skills were left behind very quickly. Like all rapid changes in structures, whether social or economic, it created great social inequality – a small percentage got mega rich, there was a small middle class and then everybody else were ‘wage slaves’ or ‘debt slaves’.

Elite financiers don’t necessarily still see the developments in the terms described. They think that only elite bankers knew how to get things done. They know much more and make the world function more efficiently. They see the banker’s role in driving growth as heroic and are puzzled that others don’t see that.

PP: I don’t think that class has connotations of inherited wealth at all. Class is about level of income. A blue-collar worker, a white-collar worker and a financier might be born into the same family – but they’ll earn different incomes and move in different social sets. Hence why I think class became more of an issue as income disparities rose. Anyway, no matter, we’ll agree to disagree.

But do you think the financial structure was largely built up as a means to paper over the underlying disparities? Do you think that this was its key function?

SD: I do agree with you on disparities of income and wealth. They were exacerbated during the ‘Great Financilisation’. As real incomes stagnated in many countries, easier access to debt – the democratisation of credit – and the opportunity to ‘speculate’… ahem… ‘invest’ in the form of privatised retirement savings became a way to paper over the problems. The people selling the debt and creating the investment products were given the opportunity to profit and they did. In many cases, they, as we know, misrepresented the risk of financial structures and were heavily incentivised by fee structures that encourages this mis-selling.

The phenomenon was interesting psychologically. It meant if you were less well off then it was your fault – you had made poor financial choices. A fascinating insight into this can be found in the late Joe Bageant’s book Deer Hunting for Jesus. People in his home town in the American South who are impoverished and disadvantages blame themselves for their plight. They oppose even the most rudimentary assistance from government as ‘communism’.

So in this sense, finance was very much part of the process of reinforcing and entrenching the income and wealth differences.

PP: Regarding the ‘social class’ thing I think we’re just quibbling over terminology, really. I see things essentially the same way.

Moving on. That people were unable to consume at sufficient levels to keep the economy going and went into debt in order to do so is clearly the underlying cause of the crisis. But what do you make of the strange situation that’s resulted? I mean, all the economists are saying – and rightly for once, I think – that we have a serious problem with demand. People simply cannot afford to buy enough stuff to keep the economy growing at a reasonable pace. And since they’re all paying down debt they probably won’t be able to take on enough debt to consume at this level for some time (which is probably less than a bad thing). What do you make of this situation? And where does this place finance? What has finance’s role become in this brave new world?

SD: A useful place to start is look at what debt does – it accelerates consumption. Instead of saving to purchase you buy today but pay tomorrow. As early credit card advertising put it, debt takes ‘the waiting out of wanting’. Debt fuelled purchasing creates demand driving greater investment, in part because producers think that demand has suddenly increased. Increased production capacity means that they have more to sell and investors demand growth in earning etc so they must generate increased sales – so the whole process takes on a life of its own. It’s a kind of Ponzi Prosperity.

Ultimately, you have to be able to pay back the debt out of your cash flows or income. If you have bought assets that are collateral for the debt then the asset value has to be stable and the cash flows from the asset sufficient to repay the debt with interest. Finally, you reach the inflexion point where you can’t service or repay the debt and the assets funded by the debt can’t generate the income to support the debt. The whole process goes into reverse.

If you use debt in this way to fuel demand then when the capacity to take on debt ceases so does demand. In effect, the world exaggerated ‘real’ demand and with it economic growth. To go back to equilibrium we have to do several things – run through the excess ‘stuff’ we bought; divert income to paying down debt, absorb the excess capacity we created, restore credit creation capacity by recapiltalising banks crippled by bad loans etc. That is precisely what deleveraging means and what is happening. So we become locked into a lengthy period of low growth, low demand which is not easy to reverse – as Japan shows.

In this environment, finance – that is banks – are part of the problem as they absorb funds as they are rescued and also a drag as they can’t create credit even where there is demand.

In the long run, the future of finance depends on whether once things get better – somewhere down the track say in 100 or 200 year (just kidding folks!) – we just repeat the mistakes all over again or change the role of banks.

Banks are utilities matching borrowers and savers, providing payment services, facilitating hedging etc. The value added comes from reducing the cost of doing so. Paul Volcker questioned the role of finance: “I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence. US financial services increased its share of value added from 2% to 6.5% but Is that a reflection of your financial innovation, or just a reflection of what you’re paid?”

The idea of financial services as a driver of economic growth is absurd – it’s a bit like looking at a car’s gearbox as the basis for propulsion. But financiers don’t necessarily agree with this assessment, unsurprisingly.

PP: I’ve always found the likes of Greenspan quite representative of many in the new elites in that he was a disciple of the writer Ayn Rand. While others weren’t/aren’t Randians – or, as some call them, Randroids – many subscribe to the ideologies put forward by writers like Milton Friedman or to the individualistic rhetoric employed by politicians like Thatcher and Reagan.

It seems that at a certain moment the elites gave up on paternalism altogether. In many ways I’ve always thought that this was in keeping with a sort of counter-culture mentality. The idea being that people no longer needed to be told what to do but would instead form into spontaneous self-organising networks that would ostensibly spring up as a result of market mechanisms. Many of these people adopt a sort of counter-culture language; speaking of ‘freedom’, ‘liberty’ and ‘individualism’.

However, the result seems to have been that this mentality has been used to justify income disparities together with the creditor-debtor financial nexus we have been discussing. Maybe you could talk a little about these ideas, especially insofar as you encountered them while working in the industry?

SD: People want neat answers and clear ideological positions – he’s a Randroid, she a Vulcan, they are Keynesians etc. It’s comforting and satisfies prejudices. Reality is never that neat. In my experience, policy makers or financiers are pragmatic rather than purely ideological. They may have a world view, but their action do not frequently tie clearly to pure philosophies, whether it be free markets or any other economic doctrines. Just look at the evidence.

Ronald Reagan – the beatified doyen of conservatives – ran substantial budgets deficits that had a distinct Keynesian taint. Blair and Clinton’s social democrat administrations presided over the aggressive dismantling of banking regulation, which looks distinctly neo-liberal not to mentioned ill-conceived. Margaret Thatcher may have spouted Hayek but she was not interested in pure agendas: “Economics are the method; the object is to change the soul.” Conservative politician Enoch Powell ridiculed Thatcher’s monetarist policies: “A pity she did not understand them!” No pure economic model has been implemented in living memory, except perhaps in North Korea.

Frederich Hayek and Frank Knight, founder of the first Chicago School considered free markets, which they advocated, to be unjust because they distributed wealth based on luck and inheritance rather than capability and effort. They were wary of the tendency of free markets to speculation, frenzy and fraud. Knight and Hayek did not consider markets an ideal tool for satisfying demand as they inevitably moulded themselves to the desires of active participants and ignored other factors, like the environment and quality of life. Knight argued that the economy is too complex and unstable to be controlled by simplistic government intervention. Intervention, he argued, is dangerous, rejecting the economic prescriptions of both the Keynesian and Friedman schools.

I always find Knight’s criticism of Friedman’s Second Chicago School interesting: “The emotional pronouncement of value judgements condemning emotion and value judgements which seems to me a symptom of a defective sense of humor.”

Everything was oriented to propping up economic growth, keeping yourself in power or increasing your profits or bonuses. It was a certain pragmatism. Few traders I know believe in pure economic models. They borrow here and steal from there. Whatever works. It’s like that line that David St. Hubbins has in This is Spinal Tap: “Before I met Jeanine my life was cosmologically a shambles. I would use bit and pieces of whatever Eastern philosophy would drift through my transom.”

Confucius wrote that: “The superior man understands what is right; the inferior man understands what will sell.” Professors and theoreticians may be after some elusive truth but basically they were the piano players in the whorehouse. Financiers did what they had always done, try to make money for their firms which, given they take about 50%, meant more for themselves. But what they did had far reaching effect on the rest of the world and the structure of society, some intended, others unintended.

PP: Some of those examples could be met with counterexamples— I don’t think Thatcher’s attacks on miners was wholly pragmatic and much of Reagan’s deficits were based on military expenditure and tax cuts to the wealthy; to call that Keynesianism is to stretch the term some.

Are you saying that ideology plays no role in policy? I mean Greenspan may not have followed an ideology when he lowered interest rates, but his willingness to aggressively deregulate indicates to me an ideological taint.

SD: That’s my point exactly. You can always find examples which justify one position or another. Policy was not a neat set of philosophical diktats.

Ideology does play a role, clearly. Thatcher wanted to reduce the poor of the unions. Reagan believed in ‘trickle down’. They and Greenspan clearly believed that market based solutions were preferable to government intervention. But my point is it is neither consistent nor coherent.

There are ideological elements. There are pragmatic reactions to what was seen to be not working – remember both Thatcher and Reagan came to power during the economic stagnation of the 1970s with popular electoral mandates for change, both economic and social. There are also personal reactions – Rand’s world view was deeply affected by her family’s plight after the Bolsheviks came to power in Russia. Greenspan’s flexible world view was shaped by his relatively modest background, his ambition and political cunning. It is not a simple Manichean world. There are no obvious conspiracies.

Labelling people ‘x’ or ‘y’ is too simplistic. There are a lot of complex factors interacting in different ways. To understand them, to understand the financialisation of the world, you have to move beyond a purely ideological framework. You have to acknowledge that there are many contradictory forces at work and they shift constantly. If you want to change it then you have deal with this complexity. Outrage won’t get you there. In reality, many socially progressively people seemed to me to adopt the position of graffiti artist Banksy: “We can’t do anything in the world until capitalism crumbles. In the meantime we should all go shopping to console ourselves.”

PP: Well then what are the alternatives? It would be nice to say that, given environmental concerns, we could all just cut down on consumption, but we’ve seen what cuts in consumption really mean: unemployment, low economic growth and general misery. In fact, an argument could be made that if we want environmental sustainability we need continued real GDP growth but we need to push this growth in a more environmentally friendly direction – otherwise there might just be a sort of ‘environmental malaise’ in which an impoverished population just ignore all environmental considerations; recent polls seem to indicate that when people go broke they stop caring about the environment. Not surprising really.

So, apart from simply cutting consumption the only other two options seem to be increased government spending – which Japan seems to show is possible beyond the previously thought constraints (their bonds have the lowest yields in the world and their debt-to-GDP is well over 200%) – or increased wages which means income redistribution. What do you think of these options? And do you think they have a realistic future or do you think we might be caught in the ruins of this collapsed Ponzi scheme for some time?

SD: There are problems to which there are no answers, no easy solutions. Human beings are not all powerful creatures. There are limits to our powers, our knowledge and our understanding.

The modern world has been built on a ethos of growth, improving living standards and growing prosperity. Growth has been our answer to everything. This is what drove us to the world of ‘extreme money’ and financialisation in the first place. Now three things are coming together to bring that period of history to a conclusion – the end of financialisation, environmental concerns and limits to certain essential natural resources like oil and water. Environmental advocate Edward Abbey put it bluntly: “Growth for the sake of growth is the ideology of a cancer cell.” We are reaching the end of a period of growth, expansion and, maybe, optimism.

Increased government spending or income redistribution, even if it is implemented (which I doubt), may not necessarily work. Living standards will have to fall. Competition between countries for growth will trigger currency and trade wars – we are seeing that already with the Swiss intervening to lower their currency and emerging markets putting in place capital controls. All this will further crimp growth. Social cohesion and order may break down. Extreme political views might become popular and powerful. Xenophobia and nationalism will become more prominent as people look for scapegoats.

People draw comparisons to what happened in Japan. But Japan had significant advantages – the world’s largest savings pool, global growth which allowed its exporters to prosper, a homogenous, stoic population who were willing to bear the pain of the adjustment. Do those conditions exist everywhere?

We will be caught in the ruins of this collapsed Ponzi scheme for a long time, while we try to rediscover more traditional sources of growth like innovation and productivity improvements – real engineering rather than financial engineering. But we will still have to pay for the cost of our past mistakes which will complicate the process. Fyodor Dostoevsky wrote in The Possessed: “It is hard to change gods.” It seems to me that that’s what we are trying to do. It may be possible but it won’t be simple or easy. It will also take a long, long time and entail a lot of pain.

PP: You say that a lot of pain will have to be incurred before anything positive happens but this sounds almost identical to what we’re being told by the mainstream media at the moment. Yet, if history is anything to go by simply sitting around and enduring pain is one of the worst depression-era economic policies imaginable. Are you implicitly assuming that the system will readjust automatically? And is this not a variation on the neoclassical theme of self-correcting systems that got us into this trouble in the first place?

SD: There are two separate issues. The first about self correcting systems. The second about what is likely to happen.

The basic system – financialisation, debt and speculation driven growth – doesn’t work. It was a kind of ‘Ponzi prosperity’ which eventually runs out of steam. I certainly don’t think that the system will miraculously renew itself like Arnold Schwarzenegger’s nemesis in the Terminator films. I have never bought that.

It is also not clear what we can do either. The period may reflect Italian philosopher Anton Gramsci’s words: “The old is dying, the new cannot yet be born, in the interregnum all manner of morbid symptoms appear.”

There are no simple, painless solutions any more. The world has to reduce debt, shrink the financial part of the economy and change the destructive incentive structures in finance. Individuals in developed countries have to save more and spend less. Companies have to go back to real engineering. Governments have to balance their books better. Banking must become a mechanism for matching savers and borrowers, financing real things. Banks cannot be larger than nations, countries in themselves. Countries cannot rely on debt and speculation for prosperity. The world must live within its means.

The basic problem is one of demand. We used debt to create demand and now that we can’t increase debt, demand has slowed down. This is crucial thing is it is going to be difficult to return to previous levels of demand, particular growth in demand that the world has come to depend. It may not be a bad thing for the environment and conservation of scarce resources but it won’t be good for growth. That’s the issue, at least as I see it, and it’s a hard one to fix.

All this also needs a fundamental change in thinking at all levels – economic, financial, political and social. That’s difficult and it certainly hasn’t happened so far.

So, reforming the economy, reining in extreme money, is not difficult but comes with short-term painful costs and longer-term slower growth and lower living standards. At best you can try to manage the process. Maintain some degree of stability and avoid a total breakdown. Try to shield those badly affected from the worst of the adjustment process. Try to maintain the fragile social contract which will increasingly be strained as the pain becomes more and more widely felt.

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52 comments

  1. attempter

    Salesmen — you know, proper ‘snake oil’ salesmen — stand in front of a crowd and whip them into a frenzy, convincing them that they can all get rich.

    I honestly don’t see how you do anything substantially different. The only difference is that, for whatever reason, your tone is more pseudo-respectable (and therefore less effective).

    people became exposed to very complex economic forces – their wages stagnated; the state reduced their benefits

    So these are just forces of nature, agentless? (Except, of course, where the government directly assails. It can always be called an agent by neoclassicists.)

    and financialization forced ill-equipped people to try to plan for retirement.

    An agent! But still a vague, amorphous one. No, it’s evidently another law of nature.

    The Sociologist Zygmunt Bauman’s metaphor of liquid and solid modernity captures the shift from a society of producers to a society of consumers. Security gives way to increased freedom to purchase, to consume and to enjoy life. In liquid modernity, individuals have to be flexible and adaptable, pursuing available opportunities, calculating likely gains and losses from actions under endemic uncertainty. It was a metaphor for the rise of financiers and the financialization of everyday life in a volatile world where risk taking and speculation was an essential survival strategy.

    Not sure what this adds to the original 19th century analysis of bourgeois ideology and practice. I guess it’s meant to obscure historical analysis, by implying that this is something new or at any rate unsystematic and unpredictable. All reformism today is telling the Big Lie that this isn’t always the predictable result of allowing finance to exist at all. They want to doom us to yet another round.

    Class is a loaded term; it has connotations of inherited wealth, privilege, education, inflexible social delineation and lack of mobility. It means different thing to different people.

    You mean you want it to have to carry such connotations in order to be the basis of the analysis. Sorry, but class is simple. It denotes one’s relation to the modes of production. Does one control them or is one an exploited cog of them? (The only significant modification modernity had to perform on Marxist analysis was that nominal ownership isn’t the be-all-and-end-all. Corporatism came up with plenty of ways to provide the simulacrum of a wider nominal ownership distribution even as power and wealth became ever more concentrated in reality.)

    Ultimately, you have to be able to pay back the debt out of your cash flows or income. If you have bought assets that are collateral for the debt then the asset value has to be stable and the cash flows from the asset sufficient to repay the debt with interest. Finally, you reach the inflexion point where you can’t service or repay the debt and the assets funded by the debt can’t generate the income to support the debt. The whole process goes into reverse.

    That goes not just for cash. Most of all it goes for energy. That’s what Peak Oil means for the whole system, even leaving aside the instabilities inherent to its criminality.

    Reality is never that neat. In my experience, policy makers or financiers are pragmatic rather than purely ideological. They may have a world view, but their action do not frequently tie clearly to pure philosophies, whether it be free markets or any other economic doctrines. Just look at the evidence.

    Yes, just look at the evidence. Their ideology and their practice is kleptocracy. They’re gangsters. Nothing more, nothing less.

    Thatcher wanted to reduce the poor of the unions. Reagan believed in ‘trickle down’. They and Greenspan clearly believed that market based solutions were preferable to government intervention. But my point is it is neither consistent nor coherent.

    It’s perfectly consistent and coherent once you acknowledge that these were all kleptocrats whose overriding goal was looting.

    but we’ve seen what cuts in consumption really mean: unemployment, low economic growth and general misery.

    There’s that lie again. Rational consumption levels mean none of those things. Only the artificial capitalist structure tries to force irrational consumption levels and imposes punishments when inevitably the economy can’t sustain such unsustainable levels.

    The only way to solve the problems and embark upon a new mode of prosperity is to abolish capitalism.

    1. Philip Pilkington

      “I honestly don’t see how you do anything substantially different. The only difference is that, for whatever reason, your tone is more pseudo-respectable (and therefore less effective).”

      Like most agitators, priests and orators you cannot see the difference between rhetoric and argument. This is why you see no difference. For other people there is, in fact, a difference. Most people distinguish between shouting from a soapbox like a car-salesman and having a reasoned debate.

      “So these are just forces of nature, agentless?”

      Das never said that. He said that they were ‘economic forces’. Most people consider ‘economic forces’ to not be detached from agents of varying forms. The only people who think otherwise are the strawmen Marxists set up and then attack for engaging in ‘reification’ — but they don’t exist, they’re just strawmen.

      People can deconstruct the rest of the argument themselves. It’s good for the critical faculties and will prevent them falling prey to snake oil salesmen and their agitprop.

      1. attempter

        I’ll be more specific. I don’t see how there can still be reasoned debate about the fact of kleptocracy (as opposed to an “out of control” or “feral” finance capitalism, which can be “reformed” to better behavior). The evidence is massive and 100% in one direction. No competing theory can describe or predict anywhere near as well. (Or indeed at all, except through endless ad hoc kludges.) The jury’s in on this one.

        Therefore, I see no probative value in continuing to pretend there’s any doubt here (assuming one’s not actually a camouflaged snake-oil salesman trying to prop up faith in a “reformed” capitalism), nor in using this as a sample exercise for the critical faculties. (I think that’s what you just said.)

        How about putting those critical faculties to the very real and needful work of developing message, strategy, and tactics, toward both the negative goal of resisting and fighting kleptocracy, and the affirmative goal of building new alternative structures within it.

        But the fact of terminal kleptocracy itself cannot legitimately be disputed, and only professional obscurantists (or aspiring professionals) would try.

        1. Philip Pilkington

          Ah, yes, create a theory so general, so all-encompasing that it will be proved right time and again. Then use it to agitate.

          “Politicians always make mistakes”

          Or how about:

          “Capitalists will always try to make money”

          No, you’re right. There’s really no point in discussing anything. From now on I will restrict my NC posts to ranting about kleptocrats. So, next week: ‘Why Kleptocracy has Taken our Stuff’ — then ‘When Kleptocrats Rob your Jobs’. I’ll ensure to do no research and simply make general statements.

          Hell, it would make my life a lot easier. Might lose some readership… but then what is a few lost readers if we should kickstart the global revolution?

          1. attempter

            It’s funny and telling that your alleged reduction-to-absurdity examples (off the top of your head?) partake of the same lying obscurantism you systematically propagate in your comments in general.

            Myth:

            “Politicians always make mistakes”

            Truth: Politicians always seek to increase their power and wealth. Any other considerations are at best secondary to this. In late-stage capitalism this means ever-escalating looting and police-statism. It especially means that all new government spending and regulation has the goal of redistributing wealth from the people to big corporations and the super-rich. By this point there are no longer any secondary considerations, except insofar as they can be used for misdirectional divide-and-conquer purposes.

            Wherever politicians make mistakes, that’s merely incompetent execution of this intent.
            “Capitalists will always try to make money”

            Here we start with an unspoken lie. As I exposed in a prior comment thread, according to the Book of Genesis, Pilkington Edition, capitalists were originally created already holding the capital. They didn’t steal it in the first place.

            So there’s the first myth here. It’s also a myth according to capitalist ideology itself.

            Truth: 1. Every way in which capitalists “make money” continues to comprise robbery from the workers and society.

            2. Even among themselves, capitalists don’t make money through mythical competition. The moment he’s able to any “competitor” shifts to racketeering mode, using market muscle and government support to enforce and aggrandize a rent-extracting position. That’s called the Rule of Rackets.

            So my analysis is a little more detailed than your fraudulent examples.

            Kleptocracy, of course, is a rigorous and detailed concept. It describes a power structure which is veritably organized crime and which, to whatever extent the people allow, will never behave in any other than gangster modes. It does feel the need to veil its criminality to some extent. Luckily, the “representative” government scam nicely performs this role. That’s a core part of the neoliberal strategy. Similarly, it needed to carry the soon-to-be-liquidated middle class while it completely destroyed the political and structural foundations of that class. Thus the temporary expedient of the exponential debt economy.

            I’ve written more extensively about this at my blog, e.g. here

            http://attempter.wordpress.com/2011/08/04/capitalism-as-disguised-oil-drenched-feudalism/

            http://attempter.wordpress.com/2011/09/03/peak-oil-and-kleptocracy-the-theory-of-kleptocracy/

            And like I said, kleptocracy describes and predicts far better than your obscurantism.

          2. attempter

            Guess what everybody! I went to go get the link to the prior post I just mentioned.

            http://www.nakedcapitalism.com/2011/08/philip-pilkington-profits-in-a-capitalist-economy-%E2%80%93-where-do-they-come-from-where-do-they-go.html

            I was going to link specifically to the part where Pilkington claims that immaculate capitalist investment comes prior to anything else and implicitly denies the necessity of prior looting.

            Well what do you know – while some of my other comments are still there, those referring to primitive accumulation have been scrubbed from the thread.

          3. Philip Pilkington

            Brilliant! My makeshift KGB censors have scrubbed all unwelcome comments.

            Seriously though, for the record I have no control over comments here and, to the best of my knowledge, Yves NEVER EVER censors anything, even when she finds it offensive etc.

          4. Yves Smith Post author

            attempter,

            I don’t remove comments unless they are grossly offensive (which generally means a nasty attack on the poster, whether me or a guest poster, or outside the norms of acceptable discourse, and we aren’t prissy here), a pretty obvious troll (certain political posts seem to attract them), or someone who has been banned who has found a new route in. Plus I haven’t read comment on this post until now, so not only would I not have intervened, I could not have.

            If you read comments, I have said I have filters that gets certain comments put into moderation. They can sit there a long time if you put them up at a time when I am off the grid. But I don’t see anything by you in moderation.

            In addition, the site went on a new server over the weekend to improve performance. That means it has to cache over five years of posts and comments. That has led in some cases for there to be a lag between when a comment is made to when it appears on the site proper.

          5. Toby

            I remember those comments because I found the idea of an immaculately conceived capitalist very funny. That exchange is no longer there, which I find odd. Since I read them, they were posted. They must have been removed at some later date. As far as I know, such cannot happen by accident.

            Yves, I think you should look into how something like that might happen. I mean it’s hardly earth-shattering stuff that must be removed from the record at all costs. No revolutions were going to start as a consequence of attempter’s argument with Philip Pilkington. Which is to say I can see no reason for Yves to scrub those sections of the exchange.

  2. agog

    “Now three things are coming together to bring that period of history to a conclusion – the end of financialisation, environmental concerns and limits to certain essential natural resources like oil and water. Environmental advocate Edward Abbey put it bluntly: “Growth for the sake of growth is the ideology of a cancer cell.” We are reaching the end of a period of growth, expansion and, maybe, optimism.”

    No truer words have been spoken on NC to date. This is not a welcome prognosis to even those as well-intentioned as PP and hence his resistance to accept the message.

    But SD has it right: our mindless belief in growth is what got us into this pickle and the longer it takes the power elites and the great unwashed alike to accept that it’s over the more painful the adjustment will be to whatever sort of future awaits us all.

    Japan seems to be on its way to getting there first, despite the stupefying levels of denial one sees here. Events are overtaking us, though, here now and there (wherever your there may be) next.

    Bravo Satyajit Das!

    1. attempter

      But SD has it right: our mindless belief in growth is what got us into this pickle and the longer it takes the power elites and the great unwashed alike to accept that it’s over the more painful the adjustment will be to whatever sort of future awaits us all.

      Does Das accept that it’s over? I didn’t get that impression. More like, “the system has to be reformed to put growth on a better basis.”

      If there’s a hidden acceptance, that’s not quite the same as Richard Heinberg titling his book The End of Growth, is it?

    2. Toby

      attempter is right. Das says in his conclusion:

      “This is crucial thing is [sic] it is going to be difficult to return to previous levels of demand, particular growth in demand that the world has come to depend. It may not be a bad thing for the environment and conservation of scarce resources but it won’t be good for growth. That’s the issue, at least as I see it, and it’s a hard one to fix.”

      I read this as an alcoholic ‘admitting’ he’s addicted, but hoping the cure might lie in that new-fangled, stronger wine he heard about, especially now that whiskey and vodka cost way too much.

      But the rot is too deep. The money system itself, being based on interest-bearing debt, being therefore a state-sanctioned ponzi scheme, systemically requires growth. If the economy is not growing, it is collapsing. Hence, interest/usury is the problem (one of many).

      Solutions like a negative interest currency–to deflate the economy while providing day to day liquidity, as humanity works out new structures of self-organization, re-localizes and puts together the foundations of the needed new paradigm–is an idea with potential. Also necessary for this coming transition will be a social dividend.

      Having accepted that growth is not coming back we need to accept that capitalism is not coming back. It has been dead in the water for some time now. Reasoned debate about how to redesign our socioeconomics is vital. For my money, Charles Eisentein’s suggestions in “Sacred Economics” are a very good starting point (I touched on two of his proposals above; of course the ideas are older than Eisentein).

      So, how about interviewing Mr. Eisenstein? He has a plan which I believe needs a thorough public airing.

      1. craazyman

        Toby, for those of us too lazy to do the lifting ourselves, what does Mr. Eisenstein say, in a nutshell?

        I admit that lazy people should do their own work and we don’t even deserve to have things simplified for us. But we rely on charity and the kindness of strangers. :)

        And whenever I see someone named “Eisenstein”, I reflexively think they must be smart as hell, because the name is so close to Einstein, who was smart as hell for sure. I still don’t quite understand relativity, personally speaking. The faster I go, the slower I am, or something like that. Already it sounds complicated.

        And this thing about “relocalization”. I understand the appeal of that, even though I live in New York City, which is a big place. Not sure if I could live with a few hundred people out in the woods somewhere watching the tomatoes grow. I think I might really go crazy.

        And the other thing. If everyone relocalized, then we may be back to the dayz of the savage tribes and all their weird consciousness. YOu know how that one went. The shaman and the totems and the taboos and the clans and all that stuff, shaking feathers and tying people to trees. Not right away, but after a century or two, probably. Not that we’re any better, but there’s always hope.

        I think I’ll stay in New York City, where at least if I meet really crazy people I can avoid them without much trouble. It’s really liberating not to be tied down to centuries of tradition, which eventually becomes a caste and a god. To hell with that (pun intended, ha ha).

        1. attempter

          Not sure if I could live with a few hundred people out in the woods somewhere watching the tomatoes grow. I think I might really go crazy.

          That’s not what relocalization is. Relocalization seeks to take back our landbases and infrastructure and rebuild our communities according to local economic conditions and along true democratic lines. It’s cooperative by nature. It doesn’t want to run away, and it’s not a mirror image of corporate Social Darwinism. You’re thinking of survivalism.

        2. Toby

          Sorry craazyman, but I’ve given up doing nutshell summaries of this stuff; there are too many layers of misconception to peel away. No nutshell of something very new can appeal anyway, so I rely on the logic of why we must look at radical ideas; today’s greed- and fear- and scarcity-based paradigm has outlived its usefulness, and I think this is becoming increasingly obvious. Only, most of us don’t want to accept the ramifications of this; they are too huge.

          The simplest essence of Eisenstein’s plan must already be clear; a socioeconomics happy with steady state growth, in which consumerism becomes less and less palatable to all, in which money itself takes on less and less of a role. There are no fixed paths to follow, nor are there, nor should we look for, any Leaders to tell us what to do. It’s up to us.

          The only way I can imagine this taking off is if we all know why options A B and C are worth trying out, and do our bit to bring them about. The current status quo is hardly going to press for its own extinction, so they are not going to corral us anywhere except into deeper peonage of increasing misery and emptiness. From this simple and obvious fact stems relocalization as an escape into new socioeconomic structures. It’s not about primitivism, its about manageable direct democracy, about slowly discovering and establishing consensus-finding, one-human-one-vote, each with veto, decision making; a participatory political process that will be unworkable at ‘national’ scale (until later perhaps, though the nation state should dissolve). But the tribal thing you rightly mention, the slippery return to seeing all outside the tribe as somehow Alien and Other, is to be avoided as much as possible. Hence a loose federation across the planet of regional polities sharing information about what works and what doesn’t. Sharing is absolutely key.

          And what we can afford in terms of energy, soil fertility, water tables and distribution, gadgets, entertainment, housing, mass transport, and so on, will become clear as time goes on. To get to the kind of clean-enough information we need to understand planetary and regional carrying capacity we need a money system which allows the science to call the shots rather than profit maximization as steered by The Invisible Hand. We’ve seen the effects of money making the world go around, it’s high time for something else to get a shout. Hence demurrage, which keeps money flowing, and social dividend, which breaks the bond between waged-labour and survival/dignity. In general we should be demoting money’s role and promoting processes that generate real, sustainable wealth. That this is a fraught process should not need mentioning. But that does not mean we should not head off in that general direction.

          I’ve always agreed with you that the money system will only change when the requisite consciousness to want change in a healthy and sustainable direction emerges. I’ve been hoping against my better judgment that such a change can occur prior to catastrophic collapse, but it does not look likely. You don’t want to put in the leg work, and neither do most others. When I emit the cliche, “It’s up to us,” I mean it. But that means hard work for everyone. As attempter rightly points out, the last thing we need at this stage is Better Elites. And because it’s up to each of us, and because we must break new ground, there can be no clear road map, nor can a nutshell of any possible vague road map really entice anyone; too vague, too reliant on some shining Mummy or Daddy to clean up our mess. The mere logic of capitalism and its inevitable collapse should be enough to motivate us to do the right thing. If it doesn’t, then quite frankly we’ll just end up as yet another extinct species, to smart to learn. Which would be a shame, because I think we’re amazing.

          1. craazyman

            well Toby, you’re so right that I kind of feel guilty that I’m not doing more. Somebody has to.

            The hard part will be forming institutions that promote and ensure ethical cooperation between complete strangers without overly subjugating the individual to “the system” to such a degree that the system becomes its opposite.

            Humanity hasn’t nailed that one yet. But that’s not to say it’s impossible. Although it seems to me almost a law of nature that the part and the whole can never be reconciled except through the imposition of some construct of pure imagination that the artists call “form”.

            Micro and macro, cell and body, atom and void, wave or particle, person and state, gnosis and law, continuity and discontinuity, like Zeno’s paradox.

            That’s enough brain porn from me for one day. LOL

          2. Toby

            We don’t seek perfection, we just wisely accept new information, i.e. that perpetual growth is impossible, then work to adjust accordingly.

            As to liking weird strangers from over the hill, that’s in us isn’t it? I was in Hong Kong a few years ago undergoing a brutal ‘massage’ in some supposedly famous Chinese dude’s house (he had Hollywood folk like Sylvester Stallone as customers), when he applied pressure with his elbow to my right calf. After a few seconds of manful resistance I screamed like a girl. When I exited his parlour to enter the waiting room (his front room, with TV and children’s toys) his 10yr old son greeted me with a very concerned look, and rested a sympathetic hand on my arm. He didn’t speak a word of English so the exchange was non-verbal, but I’ve never forgotten the humanity of that moment. Speaking for myself, I cry when I see photographs foreign children mutilated by war, and I know I’m not alone in this.

            There aren’t any guarantees of anything, there’s only reacting to information. Don’t feel guilty, do what you feel motivated to do. In my opinion it begins with understanding, though that part is changing always.

  3. joecostello

    This is really good. The one helpful thought is we don’t have to tie standard of living into the amount of stuff produced, we can all live quite well producing and consuming less stuff, we don’t have value for that yet.

  4. René

    “It’s a fascinating process – so everyone finds themselves deeper and deeper in debt and speculation.”

    Adam Smith view on that process;

    “chief enjoyment of riches consists in the parade of riches, which in their eye is never so complete as when they appear to posses those decisive marks of oppulence which nobody can posses but themselves.”

  5. PhilJoMar

    In Part I many complained that Das was being a bit too coy about the problems the banks created and the motivation behind their day-to-day operations. Well (despite being taken out of context) in Part II some real truth passed Mr Das’s lips in relation to traders and I quote: ‘they borrow here and steal from there’. Wise words. Sort of.

  6. eric anderson

    Great conclusion.

    Consume today, pay tomorrow. I think there was a commandment about that. Ah yes, “Thou shalt not covet.”

    There’s your trouble. The covetousness of the consumer, coupled with the covetousness of the banksters, who sought to profit obscenely and dishonestly from the covetousness of the consumer, plus the covetousness of the political class for power built on the covetousness of the entitlement classes, equals a perfect storm, an economic hurricane. The interregnum is also a great metaphor.

  7. Susan the other

    Where are all the people who believed, as Forbes put it 20 years ago, “There’s cash in all that trash.” Why can’t capitalism throw it in reverse and do the clean-up? Profits are a fantasy in either direction. But we need some form of money.

  8. Skippy

    Thanks Philip & Das

    Attempter once again you show, seemingly, a complete abstinence to social trajectory, morality arguments from the arm chair stuff. Whilst I’m no apologist to rentiers (production thingy) or growth (conspicuous social consumption), you_to date_have not provided a transfer mechanism.

    Skippy…With out this little inconvenience your TRUTH is moot. Pray tell of your worldly travels and how they contribute to your musings…eh. Ensuing gross generalizing and projection incoming, may I live to tell the tale.

    1. attempter

      you_to date_have not provided a transfer mechanism.

      I have no idea what that means, but I’m sure I’ve fully answered every question, unlike others here.

      1. Ahahaha

        Perfectly set up by Skippy, and perfectly proven by attempter:

        Skippy: “Ensuing gross generalizing and projection incoming, may I live to tell the tale.”

        Attempter: “I have no idea what that means, but I’m sure I’ve fully answered every question, unlike others here.”

        Ahahaha… too funny. Such lively conversation. Chuckle and regroup.

  9. Dan Duncan

    Attempter, you’re managing to turn Pilkington into a sympathetic figure.

    But seriously, just give it up: The interviews are great and both Pilkington and Das have been outstanding. Hell, I don’t like admitting it. But facts are facts. Pilky has asked great questions and Das has met the challenge with equally great answers.

    Speaking of past posts, I once wrote the following to Attempter. [Lo and behold: It's still there!]

    And now, in my best Casey Kasem type-face, I bring to Attempter this long distance dedication:

    The vague, content-free mixture of unsubstantiated assertions is “hypergraphic” writing. Also called “The Midnight Disease” by Harvard neurologist Alice Flaherty.

    Hypergraphics tend to be hyper-philosophical or hyper-religious. Their writing is marked by an irresistible urge to string together abstract and interchangeable words.

    Take a good prefix, like “pseudo”, “neo” or “post” and combine it with a robust historical adjective, like “fascist” or “feudal”, tack on a noun picked up in a collegiate classroom…and you’ve got the core of Blog Zombie, hypergraphic prose:

    “The pseudo-capitalistic hegemon is embarking down a path of post-feudal servitude.”

    The interchangeability, of course, allows the Blog Zombie to come back strong the next day with:

    “The neo-Marxist Leviathan trudges down the post-apocalyptic highway of pseudo-serfdom.”

    Of course, it’s content-free and nonsensical, But it’s fresh! Plus, the writer appears to harbor quite the intellectual cache, so he “must be taken seriously”.

    As time goes by and those posts, how they do fly…

    The gravity of this gravitas serves as a grave attraction for other Blog Zombies to come and congregate…

    And now, cue the Oingo Boingo and an Evil Laugh….

    It’s a Dead Man’s Party!
    Who could ask for more?
    Everybody’s comin’, leave your body at the door
    Leave your body and soul at the door . . .

      1. Skippy

        “But I’m sure Pilkington and Das will be happy for your support.”

        Personality competition[?], come on attempter, are there only two sides of a coin with you. Light / Dark, Good and Evil, God / Devil, when more times than not their one in the same…duality.

        I have agreed in_principle_with many of your points over time. Yet, the first time I call one into question you unleash the hounds of hell, Orwellian WTFOMGBBQ full of personal flourishes. Personally its been my observation that you bring, sorely needed I might add, points of order to the over all debate, although none are phrased as or in the form of a question. The latter is a troubling observation which imbues a sense of certainty over such a broad range of human activity, timelines, incomplete data, that well, paints you as an inflexible ideologue.

        Skippy…maybe, its just all the time and effort over the years in the tubes, endless ideological warfare, endless mental loop, PTSD stans style.

        PS. Full of defects myself, welcome to the club.

        Come together or get Down With the Sickness

        http://www.youtube.com/watch?v=6Q3bNHBaEx8

        1. attempter

          1. If you can read Duncan’s comment and see it as about anything other than “personalities”, you truly have a bizarre reading comprehension.

          You also missed the part where he himself made a point of saluting Pilkington and Das.

          So once again you get things exactly wrong.

          2. Yet, the first time I call one into question you unleash the hounds of hell, Orwellian WTFOMGBBQ full of personal flourishes.

          As I said before, history is not your friend here.

          http://www.nakedcapitalism.com/2011/09/links-9411.html

          I invite anyone to read the exchange and judge for himself who personalized things. The fact remains that I did what I always do, attack the rackets. You never objected until I attacked a particular racket, the telecoms.

          And if people read the thread, they’ll see that he initially doesn’t argue just with me (though he only names me), but with several anti-telecom comments. So at first the problem isn’t my being an “ideologue”, but criticism of Big Telecom as such.

          BTW, I’m certainly no more of an ideologue than anyone else, and indeed far less so when you consider how all my views are in line with the evidence, while the status quo ideology exists in direct defiance of it.

          I notice you also didn’t clarify your cryptic allegation above about “transfer mechanisms”. Just as I thought – it’s gibberish.

          1. Skippy

            “But I’m sure Pilkington and Das will be happy for your support.”

            Why on earth would you need to make such a statement…happy for your support[????]. Happy in this context is a personal emotional inference with an obvious backhanded delivery, belittlement. Zero relevance to your point out side setting up a tribalistic straw man – us vs, you’s….sigh.

            #2 Next we move on too “point of saluting Pilkington and Das.”

            Saluting is a military term and used to identify status in its act, not a sign of agreement with some ones opines. Excessive in trying to paint Dan as subservient by the act of agreement in their statements, there by proxy make him an instant acolyte in totality.

            Knee jerk #3…”As I said before, history is not your friend here.”

            Again with the personal dialect *friend*…shezz. Quickly followed by some abstract linking (in your mind) of my talk of government and how much is done by it, with out your manic like_all good_all evil_diatribes, too some sort of defense of big telecoms[?]. Because[?] big telecoms were PART of the thread, yet was not the POINT of my thoughts insertions. It was NOT EVERY THING the government does is BAD. Some times it actually does benign things which are then taken over for rent extraction or social malfeasance. Yet you insist on misconstruction, it was in fact your first unsubstantiated retort with an obvious emotional predisposition (why do you all the sudden side with telecoms, you used to agree with me!). BTW I loath Murdoch, the rest of MSM and their enablers. Before you foam about government having uttered enablers, they were inserted, by the monies.

            4th absurdity … “BTW, I’m certainly no more of an ideologue than anyone else.”

            Breath taking in its scope and expanse, the totality, the assumed knowledge, the self appointed certainty, over 9 billion people, released with all the casualness of one whom is righteously omnipotent, an an an elit[e]ist[!!!!], you are what you decry.

            #5 “status quo ideology”

            Any thing above your self perceived level_is_status quo in your book, whats a body to do in that case, isolation? IDK.

            6ish “I notice you also didn’t clarify your cryptic allegation above about “transfer mechanisms”. Just as I thought – it’s gibberish.

            Mon dieu! By not clarifying my [???]cryptic allegation[???] “transfer mechanisms” its meaning is rendered ignotus and worse gibberish, solely based on my not informing you? More like you poorly executing ignoratio elenchi. Think about it: transfer – to move something from one place to another, mechanisms – the vehicle used to do it. Very cryptic indeed…shezzz.

            Skippy…it is my observation from this limited medium that you exhibit the traits of a monomeglomatic uncompromising ideological zealot, a cultist one at that see:

            People are put in physical or emotionally distressing situations;
            Their problems are reduced to one simple explanation, which is repeatedly emphasized;
            They receive what seems to be unconditional love, acceptance, and attention from a charismatic leader or group;
            They get a new identity based on the group;
            They are subject to entrapment (isolation from friends, relatives and the mainstream culture) and their access to information is severely controlled.

            In addition you spend a prodigious amount of time, over seemingly long time frames (scanning), quick to go full auto on any foe and full of praise for those that you identify with or should I say would have in your camp, branded for life. Don’t forget in the either of past posts, you have provided examples of your trolling other sites, reveling in their commentators destruction, obsessively honed skill. Things that make me go ummmm.

            BTW the government you loath, as FUBAR as it is, clinging to the last vestiges of civil endeavor, is all that stands between you and the oligarchs. Once it’s gone or totally corrupted your fuked, you will cease to be a person, only people with sufficient zeros in their accounts will be law makers, they will suffer you at their leisure and you think your bound now…sigh.

            In another time and place, you would have made a mighty fine roving tented evangelist, come too me children, and I will set you free, show you the way, if you love me, agree with me.

    1. SidFinster

      Reminds me of the writing of post-structuralists.

      That or a mission statement written by the Bullshit Generator.

  10. b.

    Too fairly balanced for me. Worse: “It is not consistent”.
    Indeed:

    “The world must live within its means.
    “The basic problem is one of demand.”

    If the means are high EROI for energy access, then demand will eventually go nowhere but down. No amount of quotation of the multi-splendored wisdoms of the past will resolve this, but it certainly wallpapers well such a refined posture of dispassionate academic stoicism with guaranteed retirement benefits. Life’s complicated, people are complex and all that. Sounds like another Obama speech.

  11. Jim Elliot

    I’m in agreement with virtually all that’s been said here and I see that the problems and the changes we are facing are the result of more that “macroeconomic” effects. A huge looming issue is that there are no new continents with fertile land to develop. The easy and convenient resources as fresh water, fossil fuel and minerals have been tapped and it’s only going to get harder. I see absolutely no indication that there is any “leadership” on the horizon. In fact I predict come next election that the Democrats and Obama go down in flames as they deserve and that we have a new set of pro-war, pro-homland security, anti-evolution, pro-education voucher, anti-corporate regulation, anti-privacy regulation, anti- social security, anti-heath-care, anti-choice, anti-gay marriage corporatist Republicans in power. I’m actually sort of shocked at the lack of public reaction to level of fraud and unfairness and collusion that have gone on between government and the financial sector. I have to admit, I’m probably virtually as resigned and apathetic as most everyone else. I could devote myself and my finances to fighting for more fairness and justice untill I exhasted all, and I probably would have minimal, if any, effect on the tide. I’ll probably stand my comfortable and safe hill and watch as my dazed neighbors and fellow americans and their children are slowly decimated.

  12. Justicia

    The snake oil wasn’t just sold to individual investors but to public funds (pensions, public entities that issue “moral authority bonds) as well.

    Public infrastructure bonds have long been a favored target of the Wall Street debt machine sought out any pockets with a “reliable” income stream (from debtors/ratepayers/taxpayers) to pilfer. Yves has blogged about the exploding sewer bond deal sold to clueless (and corrupt) Jefferson County, AL, officials that has bankrupt the county. The Harrisburg, PA, incinerator (see below) is another one of these bombs. They were sold to and bought by the supposedly “sophisticated investors” who manage our public funds.

    These “deals” are legion and just how reliable the repayment streams are is yet to be seen. Investors assume the suckers will pay up — until they can’t. The stink from the sub-sovereign debt merde the banks are carrying on their books is rising.

    The Incinerator That Kept Burning Cash
    Years of Borrowing Have Harrisburg, Pa., Dodging Default

    http://online.wsj.com/article_email/SB10001424053111903532804576564882240033792-lMyQjAxMTAxMDEwMjExNDIyWj.html?mod=wsj_share_email

  13. Jim

    Philip

    In part One of your interview with Das he indicated that he viewed the world of finance as a “monoculture” in which “everyone took advantage of the system that developed.” Das also argued that the big financial players in this system see themselves as “superior beings” (masters of the universe) because they make more money than anyone else and that this attitude helps to create a culture of “financial nihilism” which then tends to view others as inferior and largely irrelevant.

    Has this monoculture of what I would call the unconstrained self in finance become the more general culture of the unconstrained self in the entire U.S.?

    In Part Two of your interivew with Das he expresses sentiments totally diffferent from that of the financial nihilists– when he states that he believes “human beings are not all powerful creatures, that “there are limits to our powers, our knowledge, our understanding.”

    It would be great to know how Das came to that conclusion. (I was helped to that conclusion by suffering complete defeat in areas which I believed I had superior knowledge and understanding)

    Do you see us ultimately the same way as Das?

    Das then indicates that the process of change we will be going through will be difficult and painful because, quoting Dostoevsky “it is hard to change Gods.”

    Put another way, is a culture of the unconstrained self truly in our self interest if in fact we are not all powerful and all of us are indeed limited in our knowledge and understanding?

  14. Masonboro

    Not to pick nits but the title of Joe Bageant’s book is “Deer Hunting with Jesus” – not “for Jesus”. This is a delightful little book that is required reading for anyone who ever wondered why the white working poor vote Republican seemingly against their economic self interest.

    Mr.Bageant’s answer is – by default. Neither party benefits these people economically and they don’t expect or want any help but Dems ignore them as hopeless NASCAR rubes while Reps actively seek their vote by appeals to religious and cultural values.

    Jim

  15. Hugh

    Shorter Das: Stuff happens

    Longer Das: Stuff happens and it’s complex.

    Das doesn’t like the concepts of class and ideology. Well, that might be more defensible, if wins and losses were more evenly distributed throughout society. But they aren’t. For a select few, it has been “Heads I win, tails you lose” to such an extent that they own nearly all the private wealth in the country as well as controlling government and through it the public wealth. All that Das can come up with to explain wealth inequality is an incredibly lame an “unbalanced moment of history.” In other words, it just sort of happened this way. But that just isn’t good enough. It doesn’t begin to get at how extreme wealth inequality has become. You can’t get to that kind of transfer of wealth unless the process is much more than a moment, and much more directed.

    Those of us who have been writing on this indeed point to a process that began back in the Carter Administration 35 years ago. And agency is important because there was nothing natural about that process. It built on itself. It’s interesting that our elites have no problem taking responsibility for what makes them look good but when it comes to those that don’t they start talking about impersonal entities, like “Economic forces”. Let’s be clear. This was not a “moment”. It was a decades long process. And it did not just happen. It was an elite construction.

    I have often said here that the 3 great issues of our times are kleptocracy, wealth inequality, and class war. Philip Pilkington and Satyajit Das may not like these, but to discuss economic and financial matters without reference to them is like debating the modern military in the middle of World War II without any reference to that war. If you want to know why they need to be a part of every post, it is because they are that central.

    Kleptocracy is the process, the constructed system that through looting effects the great wealth inequality that we see, not just here but throughout the world economy. Class consciousness is a function of the consciousness of that wealth inequality, the desire to create it (greed) and the decision to defend it (class war). Ideology is just a weapon of that war, hence its flexibility and inconsistencies. It is not meant to describe reality. Its purpose is to defend wealth.

    As for Das’ conclusion that “reining in extreme money, is not difficult but comes with short-term painful costs and longer-term slower growth and lower living standards.” We already have the lower living standards. In the 50s and 60s, it seemed reasonable that a middle class American family could have a single wage earner with a steady job, who owned a house and car, and by retirement have paid these off and have a pension. Compare that to what we have now. Two wage earners, no steady job, fewer able to own a house and pay if off, mountains of debt and no retirement beyond Social Security that the kleptocrats are now taking aim at. We already have slow growth or no growth or negative growth. As for reining in extreme money, one aspect of kleptocracy, good luck with that. If it wasn’t so difficult, it would already have been done. Under current conditions, it’s impossible.

    1. Tao Jonesing

      @Hugh,

      Very well said. Across the board.

      This indeed was not a “moment,” but a movement based on class warfare. The rentiers of yesteryear wanted their stuff back, so they reconstructed the kleptocracy.

  16. don

    PP says:

    “Moving on. That people were unable to consume at sufficient levels to keep the economy going and went into debt in order to do so is clearly the underlying cause of the crisis. But what do you make of the strange situation that’s resulted? I mean, all the economists are saying – and rightly for once, I think – that we have a serious problem with demand.”

    The crisis is inherent to the economic structure itself. The crisis was not caused by what was essentially its symptom: fueling consumption by increasing debt as a substitute for decreasing income. What explains this development? The underconsumption thesis, and assertion “that we have a serious problem with demand” entirely miss the underlying and structural characteristics of the economy, and its inherent contradictions.

    Look to the rate at which profits declined, and the attempt to restore those profits. This will explain the drive towards financialization and the expansion of consumer debt.

    http://thenextrecession.wordpress.com/2011/09/02/more-on-marx/

  17. ECON

    Not predisposed to pick at the waning carcass of financialisation so far done by all commenters, a way must be seen to enlighten the citizens in a democratic republic to be more than subservient witnesses to their own demise. Given that government, corporations, Congress and judiciary and mainstream media are formidable obstacles to understanding the contradictions inherent in the political economy and society, there remains the question “What action can be taken?” Talk is easy and cheap.

  18. Binky the Bear

    I just find it amazing that with all the money spent on marketing particular social and political policies there has been no effect. Everything just happened because faceless forces and perhaps the Marxist force of history simply drove everything to the conclusion that a few elites seem to own everything and everyone else gets to suffer along a spectrum. ALEC didn’t do anything, the Bond Vigilantes have never done anything, Fox and the Murdoch propaganda empire have never done anything, Gramm Leach Bliley didn’t do anything, Owl Grove people never did anything, nor the other organizations, interest groups, golf buddies etc. never did anything to pillage, loot or pervert the system. It all just happened! Miracle of miracles. Success has many parents but disaster is an orphan, again.

  19. Jim

    Hugh

    But what if kleptocracy, wealth inequality and class war are of only secondary importance to understanding human consciousness, the relationship between the mind and the brain and the process by which a new moral demand system can be established in our society.

    What are the origins of the kleptocratic world view?

    Did it simply fall from the sky? Does it have any relationship to culture, socialization, psychological development?

    What creates class consciousness? Is it in any way related to mind, brain, subjectivity?

    Why is our society seemingly so tolerant of wealth inequality?

    Is your concept of agency related to mind, brain, choices, subjectivity, free will?

  20. Paul Tioxon

    For my meager money, from the perspective of the capitalist world, the documentary based on the book of the same name, “THE COMMANDING HEIGHTS: THE BATTLE FOR THE WORLD ECONOMY”, BY Daniel Yergin and J. Stanislaw, shows what happened, why it happened and who did it. This is a triumphal history of the winner, in that it tells the story of the capitalist re-installation of free markets and the take over the mechanism of the state by private capital for its benefit. It preceeds the financial crisis, but certainly allows an unambiguous understanding about why such a big disaster such as we are suffering under is the direct result of private corporations, private family fortunes, and the private control of capital and the state placed in the near exclusive service of increasing the wealth and power of the power elites, the ruling class, the haves, etc.

    A lot of incidental points about the animals in the menagerie of wealth, the debt replacing the suppressed wages. All of this, begs the question, why the change in the post WWII formula that lead to the greatest economic growth in the history of the world? Ever since the change in course of government control of the market, aiming at full employment and its replacement with the Neo-Liberal model of placing the mechanism of the state in the service of private capital, or the job creators as the miscreant republicans like to call it, it has been regular financial disasters with banks and capital markets, here and abroad. What switch to an unstable system when you had one that worked well for everyone and still allowed for super rich people to get richer.

    http://www.pbs.org/wgbh/commandingheights/lo/index.html

  21. Dan G

    Awesome interview. Nice exchanges. Well done and successful.

    “Success: To laugh often and much; to win the respect of intelligent people and the affection of children; to earn the appreciation of honest critics and endure the betrayal of false friends; to appreciate beauty, to find the best in others; to leave the world a bit better, whether by a healthy child, a garden patch, or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.”
    (Ralph Waldo Emerson

  22. Linus Huber

    Well, the first step in this saga is to make the looters accountable and return to the spirit of rule of law. At least that is in my opinion the only way that allows for people to accept the upcoming hardship.

    To me, Greece is simply the most advanced on this process and we see how the public is reacting even before the most serious consequences of the looting takes effect.

  23. Roland

    Pilkington asked some good questions. Unfortunately, as Hugh points out, neither Das nor Pilkington can fully cope with the reality of class struggle. History trumps Economics, and people who have an academic background in econ probably find that a bit too much to stomach. Even a guy like Brad Delong, who’s an economic historian, simply can’t cope, and instead he consoles himself with odd bits of Berkeley real estate.

    re: Jim, the world views change with changes in the world. They act and re-act upon each other. Class struggle and class identity will shape different attitudes towards wealth and social relations. So you can stop wracking your mind with an excess of biopsych.

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