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Currency Ideals

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By Sell on News, a global macro equities analyst. Cross-posted from Macrobusiness.

The slow motion train wreck that is the Euro is grinding relentlessly on. Commentators are smugly, if not gleefully, announcing the currency’s imminent demise, enjoying their triumphant occupancy of the moral high ground. The European elites are just as determinedly asserting that the currency will survive, looking for some sand to stick their heads in. The financial markets are looking to exploit the situation to best advantage, gloriously mixing self righteousness with hyper venality. It is quite a soap opera, a sort of financial Groundhog Day.

The noise is obscuring the real questions. The most obvious of these is: “What will the currency markets look like when the situation is resolved?”

It is worth recalling why the Euro was created. It was established to establish a bulwark against the financial markets, which were wreaking havoc with Europe’s Exchange Rate Mechanism. Sovereign governments in Europe were trying to protect themselves against financial markets, specifically hedge funds and the likes of George Soros, in order to protect their control of money. There were also ancillary ambitions to have a reserve currency like the greenback, but that was always on the margin, for reasons I will explain later. It might be added that the greatest absurdity of the current situation is Soros pontificating about European policy and fretting about the power of the financial markets. A tour de force in hypocrisy to accompany his many achievements in making money, I suppose. A bit like an assassin complaining about rising crime rates.

In terms of structure, there seem to be three possibilities. First scenario is that the Euro survives and the world moves into a three part currency world: the American dollar, China’s yuan and the Euro, with the yen, Swiss franc and Australian dollar on the sidelines. This would have an effect on the power of the greenback as the world’s reserve currency because there would be significant euro-yuan trade, partially sidelining the $US for the first time since the 1950s. (That is why the Euro is not a reserve currency, by the way, because 80% of its trades have the $USD on the other side). It would create three currency regions: Europe, Asia and America. A bit reminiscent of the three super states in 1984 it will just have arrived about 40 years late.

Second scenario is that the Euro breaks up, with the world being dominated by the greenback and the yuan. This would leave the $USD with its hegemony, allowing America a degree of financial freedom on its economic policy that no other country enjoys.

Third scenario is that the Euro collapses and the world starts to revert to a more nationalist currency regime, as it had twenty years ago. Once again, this would leave the $USD supreme.

For what it’s worth, I consider the first scenario the most likely, the second fairly likely, and the third unlikely.

In terms of their sound function as money, the question is which system creates the most redundancy, that is, extra capacity to absorb shocks when things go wrong? This is crucial in a system that only relates to itself. I suspect scenario one is probably the most stable, although scenario three may also have capacity to absorb shocks. Scenario two, which would be similar to the current Euro-$USD axis, is unstable, as we are seeing. In a self referring system dyadic structures (i.e, binary) tend to magnify problems, because they keep bouncing off each other, they have nowhere to go to release the pressure.

In terms of their character, the currency markets are likely to become increasingly post-modern. They have no objective standard; it is an exercise in total relativism. That is why gold bugs look so longingly at the yellow metal, they are pining for an absolute. Thus, when it is said that a currency weakens, it only weakens in relation to other currencies. There is no absolute measure of value. This does not seem to be well absorbed by financial market commentators and politicians. For instance, at the moment, much is being made by traders about the Euro falling to about, 1.1 against the $US, as if that is some harbinger of doom. Yet the Euro has been a lot lower against the greenback, at the moment it is in the mid range:

What one notices when looking at this graph is the volatility. These major currencies have swung in a 100% range since the establishment in 1999. Such extremes can hardly be explained by differentials between their respective economies, or trade, current and capital account flows. They are a measure of sentiment amongst traders. In a world where there is no absolute, perception rules. It is a kind a idealism in which the idea comes first before reality:

idealism is the group of philosophies which assert that reality, or reality as we can know it, is fundamentally mental, mentally constructed, or otherwise immaterial.

Such idealism pretends to be realistic, based on objective truth, however. The currency markets are nothing if not riddled with contradictions. What it means in practice, was nicely described by an anthropologist friend of mine commenting on my piece last week about Peirce and pragmaticism:

So to understand pragmatism is to apply Peirce’s “pragmatic maxim” or rule. That rule was based on identifying the meaning of the behaviour in question (in our case, the transaction). And where the person was acting on the basis of his or her understanding or intent, it was necessary to identify the signs they were basing their understanding.

In this way, Peirce’s pragmaticism was an explanation, or theory, of meaning in action. Which is to point out that Peirce’s was not a theory of truth but a theory of meaning. (Some later philosophers have recognised this material difference, and adhered to it. But not all. And some scholars have criticised Peirce’s philosophy for the way it deals with truth, which is wrong to do.)

The currency markets are not concerned with truth, they are concerned with meaning. What is yet to emerge is how that meaning will play out in terms of the market structure. What we do know is that it will be extremely volatile, and fast moving. Crises are becoming the norm, which is to say they are no longer crises. That means countries can recover as quickly as they can get into trouble.

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50 comments

  1. Ed Tomchin

    I don’t know about Peirce’s philosophy, but there’s no reason a fiat economy or economic system can’t work. We’ve been on a fiat economy since we cut loose from gold in ’71 and wealth has increased exponentially. The only problem we have had is the same problem we have always had. Abuse of the system. People are people and even the least of us has abused the system to some degree. As a pirate in a movie of my youth once cackled about a possibly innocent man swinging from the yardarm, “Ah, ‘e must’a been guilty of somethin’ somewhars.” Since society is always conical, the most capable rise to the top taking their loot with them. But it’s the abuse of the system that’s wrong, not the cavalier nature of the system. If you think about it, even when we were pegged to gold, it was a fiat system. An assigned value to a base metal which changed according to political dictates. In the long run, I think we are sufficiently moral to be able to function in a healthy, self-interested manner with a fiat economy. It certainly presents an abundance of opportunity to create wealth.

    1. James

      It certainly presents an abundance of opportunity to create wealth.

      Well, that’s the rub, isn’t it? Although fiat economies present an abundance of opportunities to create “wealth;” i.e., localized hoards of the fiat currency for the few, they don’t necessarily create – and increasingly are not currently creating – an abundance of actual things which the many humans actually need to live. And why should they? With no basis in physical reality they always live up to their name: “Our currency’s worth what we say it is.” Until it isn’t. Soon.

      1. F. Beard

        How much wealth will be created if a large amount of human effort is wasted digging gold out of the ground and reburying it in bank vaults? And damaging the environment in the process? And limiting the money creation rate to the mining rate of a shiny metal?

        1. James

          Don’t misconstrue, I’m NOT a gold bug, but there has to be some basis in reality for money creation. I actually agree with you(?) and the MMTers that it should be issued debt free by the government based on production of actual goods and services in the economy and retired by taxation as required.

          1. F. Beard

            but there has to be some basis in reality for money creation. James

            Yes. But there actually is a basis in reality currently though it is despicable – the banks simultaneously create money and debt so that the money (“credit”) is backed by the need to repay it. It’s clever as Hell but inherently dishonest.

          2. James

            Let me just add, I’ve always been amazed as well at the particular insanity of the gold bugs. To imagine that in a systemic collapse that some purported “precious metal” is going to retain its totally imaginary “inherent value” is just another manifestation of the current economic insanity plaguing the world. In the end, if you can’t eat it or drink it, if you can’t readily burn it or otherwise chemically transform it for warmth, transportation, or some other basic utility, and you can’t wear it or use it for shelter from the elements, then it has NO inherent value. All the rest is purely imaginary.

          3. F. Beard

            Well said and the smarter gold bugs like Gary North seem to realize this which is why they insist that government recognize gold as money:

            “The government does have the right to establish the form of money that citizens must use to pay their taxes. The government should limit itself to a statement regarding the weight and fineness of the tax coins. If private enterprise produces coins that meet these standards, the government must accept such coins as valid for the payment of taxes. The government lawfully controls the form of taxation; but it should not have any power to monopolize the production of coins. Governments have always asserted this authority, and they have always done so to the detriment of liberty.” Gary North from http://www.lewrockwell.com/north/north895.html

            The true battle is over who gets to create money – government or the private sector. But that was settled long ago in Matthew 22:16-22 – government should create government money. Gary North would back gold with the taxation authority and power of government. But that’s fascism.

        2. LeonovaBalletRusse

          F. Beard, imagine “peak gold cubed” in light of the lust for gold by the Chinese and Indian masses, just for starters.

          1. F. Beard

            Yep, it would be an environmental horror worse than it already is. And for what? Because we are too stupid or corrupt to implement money ethically?

    2. F. Beard

      Fiat is the ONLY ethical money form for government money – that is for the payment of taxes and fees. DO NOT imagine that gold is some kind of inherently ethical money form. It is NOT!

      The solution to the money problem is coexisting government and private money supplies per Matthew 22:16-22 (“Render to Caesar …”).

      A gold standard is merely a previous tool for banks to monopolize money creation. It is thus fascism – government privilege for private interests.

      If we had true liberty in private money creation then it is unlikely that usury based money forms would be significant. Why? Because why borrow someone else’s money supply when one might create his own?

      1. James

        Let’s not turn this into another anti-Gold Standard rant, OK? I’m with you there. But Fiat has quite predictably turned into exactly what it was always meant to be: a means of economic command and control, especially since it’s issued as debt which can never be extinguished without collapsing the entire ponzi scheme. Maybe it’s naive to think that a government authority could manage it any better than the Fed, since the Fed is essentially an arm of government policy, but the debt-based nature of it we could all surely do without. I mean the very idea of it is absurd: “we the people” actually BORROWING our own money supply from private interests! It’s an idea that on the very face of it is PURELY INSANE! And yet, here we are. About to impose world-wide austerity on the largely unsuspecting masses based on what was ALWAYS merely a get rich quick scheme for a wealthy privileged few.

          1. LillithMc

            Perfect comment on the ponzi scheme. Perhaps we could add a – to the $ or whatever currency and let it go at that. We are repaying you -1/2 $1.00 or a dollar worth 50 cents so that people could continue buying what they need, the wealthy could pretend they have lots of money, but the value reflected is somewhat honest.

      2. LeonovaBalletRusse

        F. Beard, “Render unto Caesar…” may be seen also as a bid for the wisdom of separation of Religion and State.

      3. They didn't leave me a choice

        Sorry for going a bit off-topic here Beard, but you’ve spoken in length before about credit being basically theft of purchasing power from those who are not “credit-worthy”, but is this an universal quality of credit, or merely one of a subset of implementations? And if so, what kinds of systems become purchasing power stealing? Is it due to banks being able to loan money they don’t have (IE, no 100% reserve requirement)?

        1. F. Beard

          but you’ve spoken in length before about credit being basically theft of purchasing power from those who are not “credit-worthy”, but is this an universal quality of credit, or merely one of a subset of implementations? They didn’t leave me a choice

          Credit creation in a government enforced monopoly money supply for private debts is theft of purchasing power since there is no escaping the dilution by using another money or money form.

          And if so, what kinds of systems become purchasing power stealing? They didn’t leave me a choice

          Those especially that have heavy government backing such as deposit insurance, a lender of last resort, sovereign government borrowing and suppression of private money alternatives. Currently, our banks are not limited at all in the amount of credit they can create so long as they can find “credit-worthy” borrowers.

          Is it due to banks being able to loan money they don’t have (IE, no 100% reserve requirement)? They didn’t leave me a choice

          Yes. That should either be forbidden or at least all government privileges for the banks revoked so as to at least greatly limit their ability to do so.

  2. Ed Tomchin

    PS, I saw your talk on Bill Moyers tonight and was very impressed. It was what brought me here to your blog. I’ll be back.

  3. Random Lurker

    You say that currencies can only devalue against each other, so that there cannot be a general currency devaluation.
    However it is possible for all currencies to lose value if they lose value againsr the cost of labour (a generalized wage-led inflation). This way the leveragedness of the system would be reduced (since the real value of debt would fall) and the crisis of excess debt would end, however credit owners would lose out big time.
    What is impossible is that all countries engage in COMPETITIVE devaluation contemporaneously, which is the same than say that we can not be all net exporters.
    Every nation would like to be a net exporter because this allow their businesses to sell to a bigger market than the one they create paying wages, so they can avoid crises of demand whithout rising wages.
    So every country Is now trying to solve the crisis in a “pro capitalist” way, by boosting exports by devaluing or beating labor, even if this cannot work at the aggregate level, while we all refuse to solve the crisis in the pro labor way, by a wage led inflation.
    This is clearly a class war problem, not a fiat currency problem. In facts fiat currency has the advantage that can be printed, but central banks around the world are refusing to print.

    1. F. Beard

      Good points. Also, money inflation could be done without significant price inflation risk IF it were combined with a ban on further credit creation and metered to just replace existing credit debt as it is paid off. In other words, money “printing” could be non price inflationary if it simply REPLACED the credit in our system with new reserves for no net change in the total money supply (reserves + credit).

      However, without using price inflation to spur an inflationary wage spiral then it would be necessary to overcome the problem of proper money distribution (to the debtors) by directly handing out the new money to them (and non-debtors too).

    2. Yearning to Learn

      @Random:
      one of the best succinct explanations in some time.

      Of course, the reason for what we are seeing is because we now value capital over labor in every respect. We tax capital less than labor, we allow free movement of capital but not labor, and now in this downturn we protect capital but not labor.

      the creditor class has become the rentier class, and is destroying the world.

      1. LeonovaBalletRusse

        Friedman, the Extraction Capitalist Rentier Hero, set up the “moral framework” to send the “cost of labor” globally to the vanishing point. Very Ayn Randian.

    3. Ruben

      Excellent take, very clear bird’s eye view.
      Since all States dealing with the current excess debt dynamics are engaging in pro-capital boosting of export but not all of them can be net exporters (especially valid for the EMU) then some States will be losers and others will be winners, unless they coordinate to export different things, or they internally recognize their strenghts and weaknesses and specialize.

      Probably that’s why Spain is dismantling the scientific infrastrcuture it was building over the last decade: Spaniards essentially are waiters and waitresses, waiting for the German tourist, whom builds cars. Reminds of the ‘comparative advantage’ theory of the Chicago Boys in Chile.

      1. They didn't leave me a choice

        This specialisation, would it be too paranoid to assume that it’s perfectly intentional that nation states are being driven to overspecialise to the point of not being able to sustain themselves without trade? Because this is starting to look more and more like an endgame plan where the 1% locks the entire world down in a desperate situation where nobody can sustain themselves and thus need to access global markets, and therefore are susceptible to manipulation.

        1. Southern Cross

          Thanks tdlmac – you have crystalised a thought that’s been rattling around in my head for ages. This is consistent with the deindustrialisation of the west, and the export-mania so detrimental to third world farmers. It needn’t be a ‘conspiracy’ so much as a desirable outcome (to the 1%) of certain long term policies.

          Australia is currently becomming a huge quarry with 22 million people attached – 20 million of whom are surplus to requirements! Neo-liberalism here is a positive mania with nearly full-spectrum political dominance.
          Regards, SC

          1. They didn't leave me a choice

            The width and breadth of this all is mindboggling, when you start paying attention to it. I wonder if anybody’s written a comprehensive take on just how much this anti-autarkian ideology has demolished democracy in the west (and indeed everywhere on the planet). Just this take on IP law alone gives me the creeps:

            http://www.osnews.com/story/26138/IP_law_undemocratic_totalitarian_and_unethical

            Is IP law anything more than a way of locking down culture in perpetuity to ensure the eternal growth ideology has a breeding ground? After all, property rights and their exploitation are what generates GDP and generates scarcity that the system thrives off, yes? Are we nearing the logical endpoint of hundreds of years of fencing off and parceling “property” where even our culture is just a product to be sold in homogenised markets? What better way of ensuring eternal growth of the holy GDP than to make property of that, which by its very nature is not too limited by available natural resources?

            Maybe there is some truth to the phrase “property is theft”…

            I wonder how deep this rabbit hole goes?

    4. docG

      “This is clearly a class war problem, not a fiat currency problem.”

      Yes. Thank you. Exactly. While all the economists (and the above post is typical) are tearing their hair out over the difference between “monetary” and “fiat” and worrying over things like exchange rates, volatility, etc., the ultimate source of value, the worker is being squeezed mercilessly.

      According to Robert Palast, one of the few economists with a true understanding of the fundamentals, “Mario Draghi, the (unelected) head of the European Central Bank, is calling for “structural reforms” – a euphemism for worker-crushing schemes. They cite the nebulous theory that this “internal devaluation” of each nation will make them all more competitive.

      Monti and Draghi cannot credibly explain how, if every country in the Continent cheapens its workforce, any can gain a competitive advantage. But they don’t have to explain their policies; they just have to let the markets go to work on each nation’s bonds. Hence, currency union is class war by other means.” (from the Guardian, http://www.guardian.co.uk/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro?INTCMP=SRCH)

      For more on this, see my blog, Mole in the Ground (click on my moniker, above, for the link).

      What if he simply decides to put down his hammer or his sickle and walk?

        1. M Quinlan

          Actually he is, he trained with the Chicago Boys, but never turned to the Dark side.

      1. LeonovaBalletRusse

        docG, right: “more competitive” for crumbs alone. The Global Rentier .01% Cabal sits at the Banquet Table for the Feast, with their .99% Agents as cooks, waiters, and janitorial crew.

    5. proximity1

      “What is impossible is that all countries engage in COMPETITIVE devaluation contemporaneously, which is the same than say that we cannot be all net exporters.
      Every nation would like to be a net exporter because this allow their businesses to sell to a bigger market than the one they create paying wages, so they can avoid crises of demand whithout rising wages.

      “So every country Is now trying to solve the crisis in a “pro capitalist” way, by boosting exports by devaluing or beating labor, even if this cannot work at the aggregate level, while we all refuse to solve the crisis in the pro labor way, by a wage led inflation.

      “This is clearly a class war problem, not a fiat currency problem. In facts fiat currency has the advantage that can be printed, but central banks around the world are refusing to print.”

      Your analysis is a breath of fesh air in what is more and more resembling a swamp of competing conspiracy theorists run-amok.

      Your views have, in addition to their other qualities, the advantage of not having to assume a world-wide diabolical and centrally-operated conspiracy behind every movement of exchange rates, unemployment, bankruptcy, etc.

      News flash: people with wealth and power seek to maximize their relative advantages over other (including, by the way, other wealthy, powerful people, where and when they can) people of equal or, esp. less wealth and power, that is, those in relatively weaker positions. The results, predictably, can and very often do look exactly like some terribly grand centrally-run conspiracy is “behind it all.” The fact is, it’s really almost impossible to separate and distinguish between those decisions and actions which are causally-related from those which are merely coincidentally-related—they occur in temporal proximity to other acts, decisions, but not because there was a common or similar motive or other “cause”.

      Sometimes, believe it or not, a more or less large number of attentive, eager people with the time, resources and motives to maximize their positions in wealth and power, often see the same opportunities in the same or similar sets of circumstances–and, Lo! and Behold! : they leap upon similar occasions to exploit these.

      “Wow! Who’d a thunk it!?!”

      Indeed, I agree with you: there’s a genuine class-war going on–and for a long, long, time, too. But what I admire about your presentation is that you avoid giving the impression that we should see in this anything that is particularly new, diabolical or surprising. Rather, this is what people do when the fetters are lifted and there’s nothing and no one to stop them.

      Ever since that sublimely stupid and moronic Ronald Reagan mouthed his lines, “It’s morning in America,” and ever since millions of Americans, (insight-and-knowledge-impoverished from their years of consumption-driven addle-brained living) believed him– ate up his flattering nonsense– we’ve had lots of clever people with money, power, lobbyists, and a knack for gaming a system which now reads “Open! for Con-Men, Hustlers and Frauds!”

      At several intervals since the Reagan administrations’ times, the economic hocus-pocus (which George H.W. Bush in a fleeting moment of candor actually rightly called “Voodoo Economics”) has spectacularly come-a-cropper only to be put back, with greater efforts each time, on the rails to take up once more its destination of doom.

      Now, once more, the economic shit has hit the fan. And still we hear from the same band of Con-Men, “We’ve got to restore confidence in the Markets!”

      It’s now long past time that we recognize that cry as a back-handed way of asserting what otherwise would be (at least by some) seen as patent nonsense, namely, “Markets are rational! and, because they are, they’ve seen something amiss in our price-and-risk assessments and management and so, rationally, they’re ‘spooked’.” As the conventional logic goes, it’s now the job of the average man and woman, who don’t and never did have any chance against the economy’s major grifters, to responsibly bear the burdens of restoring confidence to the maniacal markets–to “Un-spook” them, so to speak.

      But, again, there’s no need for a centrally-run conspiracy in order to get much or all of the way there. The “conspiracy” starts, literally in Grade 1, when you were (or your child was) six years old. Only slightly and mildly were the fairy-tales of elementary school tempered with important context-changing fact later in high school. And, since university is by no means an exception to the rule of indoctrination and propagandizing, those who got degrees later from university found in most cases that their near-total ignorance in economic common-sense was never leavened, never corrected, revised, so that its fairy-tale character was dampened or removed.

      Our over-specialized world did its fundamental work: it left millions of people in profound ignorance but added something essential that, without high school and college, might have persisted and dogged them into their later adult lives–the gnawing suspicion that they need more and better knowledge. Instead, the schools gave them a deadly complacency along with their college diploma (high school diplomas now come with a much-diminished complement of complacency, and university diplomas may catch up sooner than some suspect.)

      We’re suffering, really, literally suffering, from a populace which has truly deadly deficits in its critical reasoning abilities. A populace which still hasn’t figured out that its own ignorance, constitutes the elite of the world’s most essential advantage, most indispensable tool, or weapon not their wealth nor political influence even when combined can match for importance what a generally tuned-out, turned off, ignorant and complacent public supplies them in advantages; a populace which still hasn’t figured out that the television set (alone or combined with the other networked mass-media such as internet and films, music and advertising) constitutes the most powerful propaganda agent–and each viewer still has to turn on the set, tune in the dial, take up the film, or watch or listen to the advertisement. And they do, with little or no reflection that they’ve brought into their homes poisons as dangerous in their way as would be a constant tobbaco-burning machine, or a little home-size nuclear reactor, leaking radiation and constantly requiring onerous maintainance and repair.

      Walter the Wit Man tells us, for example, that he’s just recently “learned” that just about everything he thought he ever knew about Hitler was wrong. But, Walter, what’s the source of these marvelous revelations? Really, I fear you thrown over one load of baloney merely to adopt a new, different load. Who is your new guru on Hitler and Nazism? And, if it’s not a load of bunk, how’d you ever allow “stevefraser” to pass off such junk-thought as this:

      stevefraser says:
      June 30, 2012 at 5:26 pm

      ( http://www.nakedcapitalism.com/2012/06/more-on-aca-decision-a-dark-cloud-on-a-sunny-day.html#comment-749259 )

      Nice comment, if somewhat over the top emotionally. Time to read “Liberal Fascism” by Goldberg for a more sophisticated less emotional understanding of the MO of the Progressive/Fascist state…a State in which the individual exists only to further the goals of the State….under the Obama/Fascists it seems as if the USA is moving to a sytem between the National Socialists of Germany (note the race based decisions of the O administration) and the Italiam Fascists. In both models, the State controlled the large corporations and instituted crony capitalism, not the other way around.

      That, for example, is a little casebook exhibit of how we’re lost and how we’re staying lost.

      Goldberg’s miscreant, approvingly cited by stevefraser, and left unchallenged by the readership– though it’s quite true that debunking every piece of absurd nonsense that gets posted in these threads would constitute full-time work –thing has been ably taken apart here, in a review by Stuart Jeffries of the U.K. Guardian newspaper–

      Terms of abuse

      Are we all fascists now? Stuart Jeffries confronts a conservative who aligns Hitler with the left

      http://www.guardian.co.uk/books/2009/feb/14/jonah-goldberg-liberal-fascism

      “Stateside, Goldberg’s title is provocative oxymoron; here it’s flat-out contradiction. There, “liberal” is regularly used by conservatives to abuse anyone left of Paul Wolfowitz. In Britain, it has no such force: here, liberalism is underscored by Mill’s principle of liberty, whereby the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others. There are problems with the principle, but it can offer a bulwark against just those forms of totalitarianism Goldberg indicts and which he suggests were foundational for modern American liberalism.

      “Mussolini and Hitler didn’t dig Mill. And yet, for Goldberg’s thesis to make sense in Britain, they would have to. His book, as published here, is a triumph of the terminological will whereby words mean just what the author means them to. It was actually a Briton, HG Wells, who coined the term “liberal fascism”. In 1932, Wells told Young Liberals in Oxford that piecemeal Fabian socialism and parliamentary democracy had failed to deliver, so should be scrapped. “I am asking for liberal Fascisti, for enlightened Nazis,” he said. What can we say about this other than that it was a then-deluded, now-forgotten speech, and that Wells would have done better to read more Mill? And yet Goldberg takes it as a key text for his own now-deluded, soon-to-be-forgotten thesis.
      Goldberg is a Kantian conservative sceptical of leftwing ideas of human perfectibility. Indeed, he argues that all totalitarianisms – Hitlerism, fascism, communism, Hillary Clintonism – proceed from the same lie: that tyrannical leaders can realise the utopian dream of “creating a better world” (Goldberg’s scare quotes), and that when US liberals abuse conservatives as fascists for the usual things (opposing abortion and stem cell research, defending marriage and intelligent design), they don’t know their history.

      “He insists we must recognise the “inconvenient truth” that communism and fascism were once bedfellows (forget that Hitler and Mussolini denounced and killed communists). In the 20s, US lefties detected no foul odour from Mussolini or Hitler, Goldberg argues. Fair enough, but I have a 1939 photograph of Lord Halifax and Neville Chamberlain flanking Mussolini at the Teatro dell’Opera di Roma – it wasn’t just lefties who cosied up to fascists. He adds: “The horror of the Holocaust completely changed our view of fascism as uniquely evil.” Fascism became a term of abuse, hung by liberals on conservatives like Goldberg. Goldberg’s chief motivation is that this must stop.
      Fascism, Goldberg contends, first appeared in government before Mussolini, thanks to the Democrat president Woodrow Wilson (whose first world war administration insisted that sauerkraut was renamed “liberty cabbage” in its cafeterias to reflect anti-German sentiment). Anyone who believes in collective action through the state to improve people’s lives is fascist or operating with unconscious fascistic impulses, Goldman argues. Our 1944 Education Act and the NHS, then, rest on the same foundational principles as Kristallnacht and al-Qaida. Eugenics, cloning, Keynesianism, state-regulated abortion, the Führer (one chapter is called “Adolf Hitler: Man of the Left”) all bear the same imprimatur.” …

      The point in citing stevefraser’s citation of Goldberg and mentioning Walter’s recently-found revelations about a Hitler he never knew (and perhaps one that never existed) is that America circa 2012 is a land of such stupendous and reliable ignorance that this kind of stuff is found everywhere and passes often, (usually?) without critical comment or objection.

      Our mass-media do this to us. And yet, and still, we make them our daily poison–now, generations are growing up with no experience of ever being “un-plugged” from what is an around-the-clock propaganda machine—notice who own and operate its elements.

      The “danger” isn’t in reading Goldberg’s fantasy version of history and fact, it’s in knowing little or nothing else. You see, maybe you learned something in middle-school, high school and college about World War II, the Nazi regime, and Hitler. The problem is, unless you’re part of a tiny minority, you’ve never picked up and thoughtfully read anything on these topics since, never ‘deepened’ the start you got in school. And, along comes Goldberg with a popular best-selling book, ready to give the reader new, fresh insights into the people and events concerned. Okay, read them–but beware. You can’t make do with only the meager remnants from high school and college, supplemented by very questionable stuff from Mr. Jonah Goldberg.

      Indeed, there exists a world of fanciful belief surrounding the person of Hitler. And, true, much of it has been promoted by or left unhindered by the routine treatment given in public school and university—for those that happen to get there.

      What we need is a more curious and more adventurous public with a hankering to know more, know better, and a willingness to have comfortable conventional opinions challenged. Goldberg challenges them but not as a talented historian might do. How many, reading him, aren’t his helpless targets for trafficking in a specious interpretation of that period of history?

      How many, today, are better than simply unarmed in face of the mass-media and its versions of contemporary facts?

      1. Otter

        Ah, well, Americans like to imagine themselves brave, free, democratic, generous, and so forth.

        As Steve Biko, among many others, pointed out : the most powerful weapon of the oppressor is the mind of the oppressed.

  4. mmckinl

    Author ~

    ” That means countries can recover as quickly as they can get into trouble.”

    Depends on the magnitude of trouble I would say. We have had 30 years of neoliberal debt build.

    True we could get out of trouble in 30 years, but, we, in my opinion have passed major tipping points.

  5. financial matters

    Great quote!

    “It might be added that the greatest absurdity of the current situation is Soros pontificating about European policy and fretting about the power of the financial markets. A tour de force in hypocrisy to accompany his many achievements in making money, I suppose. A bit like an assassin complaining about rising crime rates.”

    I think the 3rd scenario is the most stable. Give countries back their sovereignty and control over their currency. Add in capital controls, controls over ones natural resources and good corporate governance structures to avoid worker exploitation.

    US hegemony can be broken by refusing to give into their demands to protect their exports and by defaulting on US bank predatory loans and refusing to abide by the IMF and World Bank destructive austerity programs.

    1. James

      US hegemony can be broken by refusing to give into their demands to protect their exports and by defaulting on US bank predatory loans and refusing to abide by the IMF and World Bank destructive austerity programs.

      Maybe, but I think that’s where the advantages of having military hegemony(!) begin to kick in. The US has been less than reticent about playing that card as of late.

      1. financial matters

        True enough, this is the article that first got me interested in Ellen Brown…

        http://truthout.org/libya-all-about-oil-or-all-about-banking/1302678000

        Libya: All About Oil, or All About Banking?

        Wednesday 13 April 2011
        by: Ellen Brown, Truthout

        “”The BIS does to national banking systems what the IMF has done to national monetary regimes. National economies under financial globalization no longer serve national interests.

        … FDI [foreign direct investment] denominated in foreign currencies, mostly dollars, has condemned many national economies into unbalanced development toward export, merely to make dollar-denominated interest payments to FDI, with little net benefit to the domestic economies.”"

        1. LeonovaBalletRusse

          That “Swiss” thingy beloved of the .01% Reich III-IV seems a Sacred Cow.

    2. JCC

      Add to that the revoking the visas of Economic Hitmen and coming up with a powerful technological defense against drones and it just might work. Or in other words, at least in our relatively immediate future, Fat Chance.

    3. JurisV

      I don’t think that it’s a “great quote” at all. It’s devoid of any actual meaning.

      A more accurate statement might have replaced the last part with the following:

      “A bit like a repentant assassin exposing the dangers inherent in the ELITE powers that hire assassins to do their dirty work — in other words, a whistleblower.”

      However, I think the sloppy attack on Soros is uncalled for. Criticise him all you want for what he did in the past, but you’d be a fool to ignore his criticisms of a power structure that he understands quite well.

      1. F. Beard

        I think Soros may be repentant. Even the filthy rich die and will have to face Judgment. The Old Testament doesn’t say much about Hell but it says plenty about the wicked rich and everlasting contempt.

      2. LeonovaBalletRusse

        JurisV, you mean like John Perkins? Aren’t they leading the Revolution out of a dead system?

        1. JurisV

          Nice call Leonova

          They are providing a reasonably honest image of the corrupt system — it’s far from dead ! — and trying to teach the public about it. However, they aren’t leading any revolution. The revolution is still gestating — not close to being ready to leave the womb.

  6. LeonovaBalletRusse

    Yves, clear picture. Mightn’t “velocity of volatility” since HFT be a disequiibrating factor? Without “human management” by strategic intervention into the VoV in the “Facebook IPO” what might have happened? What is “realistic” within this “gods as tinkers” frame?

  7. Tom

    Which scenario has the greatest probability of making the most money for large banks in the short run?

    1. LeonovaBalletRusse

      Tom, that’s an astute utterance of the Primum Mobile of global finance. Yes, this first, last, and always, with permutations for profit added on.

      These Master Assassins of the Universe are in for the quick kill, come what may.

    2. Jim

      Scenario 3 is clearly the best for the majority of the people.

      Scenario 1 would be the worst.

  8. Jim

    So, what you’re saying is that, within 20 years, residents of Germany and Greece will be playing soccer alongside each other, as representatives of the team from the United States of Europe. Because that is precisely where option 1 will lead.

    So many progressives who otherwise would support the people against the “elites” are so obsequious to the unelected Eurocrats in Berlin. The Germans were clearly promised that they would never have to send their tax dollars to the South. Yet, that’s what would be required under scenario 1.

    I have to ask all of you who support the viability of the ill-constructed Euro, how do you reconcile your support for democracy with your embrace of a non-democratic Eurozone?

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