Systemic Malfunctioning of the Labor and Financial Markets

Paul Jay of the Real News Network interviews Heiner Flassbeck, who served as director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development, known as UNCTAD. He was a vice minister at the Federal Ministry of Finance in Bonn in 1998 and ’99. He’s now a professor of economics at Hamburg University.

More at The Real News

I’m going excerpt a bit more heavily than usual, and focus on the financial markets instead of the labor markets. And focus especially on the surreal parts:

JAY: [T]he policy is–of course, you know, sets the framework, but it’s the way the economy is built and structured now that you have such policy. …

FLASSBECK: … [T]he root cause is that we misunderstand what market economy is about, we misunderstand today how a market economy has to be run, and we misunderstand the role of policies.

JAY: … [W]e’ve gotten to a point where there’s not even a pretention of an actual market.

FLASSBECK: … I have to insist it’s even worse than fraud or anecdotal or single misbehavior of a certain person. What we have is the systemic malfunctioning of the system, system malfunctioning of the labor market, systemic malfunctioning of the financial markets. And these markets are so important that–these are the most important markets in the whole economy, and if they are not working well, then you cannot expect their economic policy to achieve what they want to achieve. … Public investment is an important part of it, no doubt about it. But, again, you see the ideology is such that they tell us, well, government debt is a bad thing. Government debt is not a bad thing. Government debt is absolutely necessary if you are in the situation where you are in the United States and elsewhere where the private households are, per balance, still savers, net savers, where the government should not go into debt anymore, but where the company sector is a big saver, a net saver. So how can you have all the sectors saving? It’s impossible. It’s absolutely impossible. But it’s not allowed to talk about it. Nobody wants to talk about it, that not all sectors can be net savers. [Another testimony to the power of the sectoral balances approach. –lambert] Somewhere someone has to be a debtor, because savings and debt always nets to zero. …

JAY: Do you think it’s possible that part of what’s happening here in terms of the financial elite, the, you know, economic, corporate elite is that they want a fundamental restructuring, especially the United States and Europe, they want wages to go down, they want a lower-wage environment, partly ’cause they want to compete with the low-wage economies in Asia and other places, and partly just ’cause they can[?]… But is it possible that this economic elite don’t think there’s ever going to be that kind of recovery, in the sense they think there’s going to, and perhaps even to a sense is what they want, a longer-term recession that restructures the whole relationship of labor and capital, and as a result of that, they focus on public debt, ’cause if you believe that’s the trajectory, then maybe public debt does get to be big and dangerous in their eyes?

FLASSBECK: Well, I think they’re not as smart as you think. They are, because if they were that smart, they would understand that it cannot work in that way. [It seems to have been working out well for them so far. –lambert] But because the one thing is you cannot really compete with developing countries, no big economy like United States or Europe as a whole can compete with developing countries about wages. That wouldn’t make sense, because, first of all, we have a currency in between, we have an exchange rate that can be changed, so you never can succeed, finally, in cutting your wage to get export markets. That doesn’t work anyway. The other thing is that the domestic market is in danger of collapsing. And this would hurt these people as well. … I fully understand what you’re saying. They like the power that they have with rather high unemployment. But in the end, they cannot succeed with that. They can only succeed with a flourishing economy, and you can make money in the long term only if the economy is growing sufficiently quick.

JAY: But are you kind of assuming–like, you say I shouldn’t think they’re that smart. But I’m suggesting to you, are you thinking they’re really that rational? [The eternal question: Are the elites stupid and/or evil? –lambert] ‘Cause you keep saying in the long run, in the long run. But do they actually care about the long run? [Perhaps the whole flap about Niall Ferguson, Keynes, teh gay, and the long run was a distorted echo in the zeitgeist of people who really have problems with the long run? –lambert]

FLASSBECK: Yeah, that’s one thing that I acknowledge already. Many of these people do not care about the long run. But this is mainly true for people in the financial markets, because they don’t have any fixed assets. You know? They have nothing that can be lost, so to say. They have a number of papers, and they know anyway that the value of these papers is very questionable, and the only problem is to get out early on. But if you are an owner of a bigger compound, of a bigger factory [incompr.] and you have a lot of fixed capital, then I think you think a bit about it. Otherwise, we would have to say, well, then market economy is over and it’s no longer doable, it’s no longer an efficient model at all. [Oopsie: Caterpillar CEO: ‘We Can Never Make Enough Profit’ –lambert] I’m not that skeptical. I’m very skeptical concerning the financial market and the labor market. But I think overall in the goods market, if the other sectors are well regulated, then you have a chance to go back to [crosstalk]

JAY: Now, do you see any sign of this at the political level, a division in the interests between what you can say is the goods sector and the financial sector? Because the goods sector seems just gleeful about the fact that they can drive wages down, break unions. And they don’t seem to have any longer view than the financial markets do. I mean, they think if they get their own–they can beat up their own workers, somehow magically there’s going to be some other workers that can buy their stuff.

FLASSBECK: Yeah. Yeah. But this is an error, as I said. This is the biggest of all errors. If you are a short-sighted person in the financial markets, you can be very rational. If you are a short-sighted person in the goods market, it is much more difficult to be rational, so to say, and to get what you want, because you have to use your capacities for a couple of years, and you cannot expect that the people can be exploited for a couple of years without having negative repercussions. …

JAY: I was at a conference a couple of years ago that Soros, George Soros organized. And he started off the conference. He spoke first. And he’s certainly someone who knows how to make money out of crises. But his opening words were: I’m bewildered. And he went on to say that he’s totally flummoxed, bewildered by the attitudes of the rest of the financial elite, who don’t seem to want to deal with any of the structural issues. And this is a guy, as I say, he knows how to make money out of these situations, but that there’s no rationality left in these circles. It’s a feeding fest. And they have a political power that doesn’t seem to be able to be challenged, at least within the current paradigm.

FLASSBECK: No, that’s right. As I said, in the financial markets I fully agree. If you look at how fiercely they are fighting at this moment in the United States against any bit of regulation in the commodity markets, for example, where we have very clear evidence, as I said, we have extremely clear evidence that the prices are driven up by financial speculation, by the kind of financialization that we have, where we have clear evidence that the volatility is increasing. … [W]e have a big systemic problem. This is a systemic problem of the market economy. As I said, I’m not as skeptical in the goods market, in the normal producing markets. There it is always an attempt, as you said, by enterprise, by company sector to drive down wages in a very short-sighted view also. But this is manageable, much more manageable by a competent [Is “competence” the issue?! –lambert] government than in financial markets, because the financial markets are putting so much pressure and they have so much money and they are permanently sponsored by the government system with zero interest rates at the moment.

At this point, I ought to go all analytical, but I have to confess I’m as bewildered and flummoxed as Soros (and Jay’s tone sounds more than a little puzzled). I keep going back to Jeffrey Sachs, with whom Flassbeck and Jay (and Soros) seem to agree:

Jeffrey Sachs: Well, thank you very much for saying it and practicing it. I do believe – by the way, I’m just going to end here because I’ve been told I have to run to the U.N. in fact right now – I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I’m going to put it very bluntly. I regard the moral environment as pathological. And I’m talking about the human interactions that I have. I’ve not seen anything like this, not felt it so palpably. These people are out to make billions of dollars and nothing should stop them from that. They have no responsibility to pay taxes. They have no responsibility to their clients. They have no responsibility to people, counterparties in transactions. They are tough, greedy, aggressive, and feel absolutely out of control, you know, in a quite literal sense. And they have gamed the system to a remarkable extent, and they have a docile president, a docile White House, and a docile regulatory system that absolutely can’t find its voice. It’s terrified of these companies.

If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I’m afraid to say, and no party is – I mean there’s – if not both parties are up to their necks in this. This has nothing to do with Democrats or Republicans. It really doesn’t have anything to do with right wing or left wing, by the way. The corruption is, as far as I can see, everywhere. But what it’s led to is this sense of impunity that is really stunning, and you feel it on the individual level right now, and it’s very, very unhealthy.

I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language, and I’ve not seen it once. And that is shocking to me. And if they won’t, I’ve waited for a judge, for our president, for somebody, and it hasn’t happened. And by the way it’s not going to happen anytime soon it seems.

So, as Professor Flassbeck does in part three, we can make all the policy recommendations we want — and I think we should, if only to pre-figure the kind of politics where we’re actually listened to — but what difference does that make when the elite moral environment is pathological? (Which I take to mean, though Sachs does not say, that actual persons are sociopaths or psychopaths (“no responsibility to people”)). Sachs isn’t using moral pathology as a metaphor; he means it quite literally. I mean, take Elizabeth Warren: I like her well enough; she has a nice smile, even if whenever I see people smiling in the media, I ask myself “What the hell have they got to smile about?” Regardless, if Flassbeck, and Jay, and Soros, and Sachs are right, Warren’s policy recommendation of (say) lowering student loan interest rates to 0.75 percent isn’t even tinkering around the edges; it’s not even tinkering in the next country over; it’s not even tinkering. It’s the same with my plastic; whenever I put something on it, a percentage goes all the way up the food chain to enrich an actual sociopathic person; and so with Warren’s 0.75%, even if that is “better” than 6%. (Then again, there are some systems that do seem to work in a not completely Kafka-esque fashion, like food stamps, or the U.S. Mail, or Costco as opposed to Wal-Mart, or a ton of little businesses in my small town, as well as millions of ordinary relations, many non-transactional in nature, among all sorts and conditions. It doesn’t do to be apocalyptic; realism is quite frightening enough.)

I dunno. For awhile, I was running the riff that “Versailles is a sac of pus waiting to burst.” Flassbeck, Jay, Soros, and Sachs seem to agree. But when exactly does the wait end? And what pricks the sac? And what happens after that? Besides a messy and dangerous clean-up phase, including terrible risks of infection?* Clearly TINA has me in its grip. If this were a family, I’d try to stage an intervention. But the political economy is as much like a family as government is like a household. Is there a way forward here? Readers?

NOTE * From the Twentieth Century: The Czars -> Lenin; The Last Emperor -> Mao Tse-Tung. One death is a tragedy; one million is a statistic….

NOTE This interview the middle part of a three-part series. Here’s the first: Apres Moi, Le Deluge – Make Money Now To Hell With Tomorrow; and the third: Taxing Corporate Profits will Force Investment.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


      1. JGordon

        We would elites support Monstanto and nuclear power, things that have the potential of wiping out all life on earth, including that of the elites?

        The obvious answer of course is that they are not stupid, but psychotic. If you look at it from that perspective, then everything the elites do makes perfect sense.

        1. Nathanael

          Psychopathic, techincally.

          They are incapable of being afraid of long-term consequences, due to a mental defect.

      2. Susan the other

        I’ve been reading American History and last nite I read about the infamous Haymarket Riot in Chicago in the 1880s. And the tragedy that ensued and the indelible mark it left on our social conscience. I firmly believe that sort of resentment lives in our collective social conscience for literally hundreds of years. And then I realized I didn’t understand the nexus between unions and socialism. The trajectory from serfs to guilds to “combinations” to associations to syndicates to parties to unions. I do not understand why that last step to socialism and guaranteed labor similar to the European experiment didn’t occur here. And now we are bent on destroying the unions once and for all and the new scheme of the corporations is to import labor for specific jobs regardless of how desperate our own population, especially our college grads, are for work. I agree with the point where this interview left off – it is a question of functional government. But when corporations control government, as they have here for over 100 years with increasing power, the government itself doesn’t know what else to do. Look how Obama pandered to the unions just to win reelection and then unceremoniously dumped them.

        1. Julian Dennis

          No they have not. Certainly they have always had unfair advantage, but during the Jackson administration there was pushback. More recently after the crash of the thirties regulations and social spending led to a less unequal division, not perfect but better.

          The difference however in both of those cases was a President was behind the pushback. Ah wouldn’t be nice to have one who at least a little bit on our side.

      3. Nathanael

        “Are our elites that stupid?”


        This is what I’ve been trying to get through people’s heads for the last several years.


        They do not recognize what the ancient Egyptian kings recognized: that the job of the government is to keep the public fed and busy; that that is what keeps the elites in power. This has been known by kings throughout history, and our current elites DO NOT REALIZE THIS.

        This may be due to clinical psychopathy.

      4. nonclassical

        “But in the end, they cannot succeed with that. They can only succeed with a flourishing economy, and you can make money in the long term only if the economy is growing sufficiently quick.”

        ..obviously unaware of “Shock Doctrine-Rise of Disaster Capitalism”, performed
        upon South-Central American nations, 70’s, 80’s…(and related war crimes, by Friedmanite-“Chicago Boys” war criminals)…

        ..have we already forgotten HW telling “W” he didn’t take out Saddam, as it would DESTABILIZE the entire Middle-East?? Does anyone believe DEstabilization was not the Cheney-“W”-bushit GOAL??

        “Civilization” be damned…mother earth takes no prisoners…historical documentation (Kevin Phillips-“American Dynasty”-“American Theocracy”) shows what happens when manufacturing based economies DEvolve into “financial services”=paper debt economies…and Phillips was Nixon acolyte..

  1. Timothy Y. Fong

    “But the political economy is as much like a family as government is like a household. Is there a way forward here? Readers?”
    The problem is pretty simple. American elites seem to believe that the US is immune to the cycle of nations. They simply cannot grasp the potential negative outcomes. That is, if things go really wrong, some oligarchs and their retainers (both public and private) will find themselves torn apart by angry crowds, or pursued to the ends of the earth by a new revolutionary government.

    The denial falls into two categories. The first, and most common, is a belief that “democracy” and the Constitution mean that things can never fall apart. This is a common belief amongst attorneys and other working professionals.

    I find this view to be especially ironic when expressed by relatively conservative Christians, since one of the basic tenants of Christianity is that human beings are fundamentally fallen and imperfect. Apparently, however, that doesn’t apply to Americans, which again, makes no sense, seeing as the Bible does not mention the United States anywhere. Then again, it does make sense, as a friend of mine in the clergy has observed that some of his most rabidly conservative congregants have never actually read the Bible.

    Professionals of course, generally have to make it through the filtering system of higher education in the United States, which means buying into the reigning political orthodoxy. Incidentally, that recent survey about American attitudes toward armed rebellion seemed to show that the more education someone had, the less likely they were to believe that armed rebellion would be necessary in the coming years.

    The second view, which I suspect is in play amongst the pathological elite mentioned by Sachs, is the belief that they can buy protection. Call it the “high walls and trustworthy details” philosophy. I can see how a person could believe that if they live in a walled community (or co-op with a doorman), and have a trustworthy security detail, they can avoid any consequences for their actions. Security details can be either wholly private, or simply off duty police officers. Indeed, in a place like NYC, the police can be ordered (paid) to bust the heads of any pesky protesters.

    In that light, Mayor Bloomberg’s campaign to more strictly control firearms makes perfect sense. The truly worthy….err…wealthy, will always be able to hire off duty armed police officers (pistols politely concealed) as bodyguards. Removing firearms from the hands of everyone else is a nice insurance policy. I understand that the dogma around here is that firearms and violence are ineffective nowadays in political struggles, but, I’m sorry, the fundamental drives of humans don’t change, no matter how much we’d like to think otherwise. Bloomberg won’t get his way outside of the Northeast. There are simply too many firearms in circulation, and any effective action to seize them would probably precipitate a civil war– at least secession, if not a split amongst security service personnel.

    Ian Welsh had a very good interview the other day where he mentioned that if things go wrong, it will be very ugly, and a lot of innocent people will get hurt. That is true, and it is a measure of how depraved and foolish our elites are that they are risking that turn of events.

    This is going to sound somewhat harsh, but perhaps what our society really needs is an extremely ugly lesson in the unintended consequences that can happen when a few people decide to take all the wealth and oppress the shit out of everyone else. That would be a decisive end to the ridiculous nonsense about how “it can’t happen here because we have democracy.” If that happens, and we survive, somehow, we should take a cue from the Japanese and their tsunami markers. After a tsunami, people mark the safe areas, and the areas where the water came up to. In some cases the markers are centuries old, a warning for the future. We should put up markers to remind everyone of the consequences of acting like short sighted sociopaths. Sociopaths may not feel empathy, but they certainly have an instinct for self preservation– and future sociopathic elites (let’s not kid ourselves– they’ll be back) should have a dire reminder of the lethal consequences of overreach.

    1. jake chase

      I am afraid you are being romantic and melodramatic in your expectations. What is more likely is that the middle class will move seamlessly into customer service at Walmart and other oases of putrid consumerism. Americans to the end will be passive consumers of vapid entertainment and disgusting fast food and carbonated sugar water. Look at the amazing number who still smoke cigarettes and gamble at casinos and horsetracks, not to mention bookmakers.

      Our individualism may be carcinogenic and idiotic but it is deeply inbred.

      1. Generalfeldmarschall Von Hindenburg

        I wish I could say jake is wrong. Things here will have to devolve to the level of the Latin American latifundia with the descendants of today’s “middle class” (working class is a forbidden term) living in favelas and being hunted for sport by the children of the elites before they pull their head out and disabuse themselves of this Horatio Alger/Ayn Rand mythology that anyone can be rich through prayer and hard work.

        1. Nathanael

          I’ll say it: Jake is wrong. Walmart is going bankrupt, y’know?

          The people running the latifundia are SMARTER and LESS CRAZY than our elites.

          Now, after our current elites are overthrown, who will replace them? Perhaps a system similar to the latifundia. But it won’t be the same elites. Because our current elites are really self-destructive; they don’t have the sense that Julius Caesar had.

        1. Massinissa

          Pardon me, but I dont understand what his comment has to do with american exceptionalism?

      2. Sy Krass

        There will always be exceptional people who will not die if they smoke cigarrettes, not have clogged arteries if they eat fast food, win at the casine or horsetrack because they intuitively know who will win, luminous beings are we not this crude matter…


        Sy Krass

    2. banger

      Nations don’t matter–we live in an emergent international Empire with an emergent imperial court and a virtual Emperor.

      I don’ believe this country is a Constitutional democracy on the federal level. The two Party system doesn’t work anymore because the power-elite has gamed the system. The genius act the oligarchs used was to create an Orwellian state of permanent war which actually suspends the Constitution which is in place only at the pleasure of the power-elite. Boston showed what can happen should anything that looks like “terrorism” occur.

      Washington is the main global imperial court and all who work there are all part of it. There is no difference between government officials, politicians and journalists other than the fact they represent somewhat different interests.

      Great comment on education and how it vets the elite–that’s why universities turn out little scared clones today.

      I think armed rebellion is unlikey but I’m thankful to be living in the South nonetheless.

      1. Nathanael

        Armed rebellion is extremely likely, but don’t make the mistake you just made. The South is going to be the site of pitched battles; the Northeast and Pacific Coast are probably going to have straight-up successful secessions. Most of the South is the equivalent of Bosnia, while the Northeast and Pacific Coast are the equivalent of Croatia or Slovenia.

    3. nonclassical

      Mr. Fong,

      ..are you forgetting neoconservative return to “manifest destiny” political opportunism??:

      “I find this view to be especially ironic when expressed by relatively conservative Christians, since one of the basic tenants of Christianity is that human beings are fundamentally fallen and imperfect. Apparently, however, that doesn’t apply to Americans, which again, makes no sense, seeing as the Bible does not mention the United States anywhere.

      “Project For A New American Century”, anyone??:

    4. Julian Dennis

      Yes let’s go for it! Would anybody like to join my new religious movement ‘Hang a Banker for Christ.’ If you won’t do it for yourself, if you won’t do it for your loved ones, if you won’t do it for that stranger in need, then do it for the Lord!

  2. Virmont

    To paraphrase George Carlin: Where do you think these “pathological elites” come from? Mars?

    Parasites as “pathological” as the American ones could only survive on a certain type of host: a people of proud ignorance and infinite obedience.

    What you call an infection (a Lenin o a Mao Tse-Tung) would actually require a population with many redeeming qualities. America, on the other hand, is the same old opportunist genocider it started out as, it just goes into hibernation for awhile, dormant like a retrovirus.

    Americans would sooner idolize the pus-filled sac while calling to lay waste to the nearest defenseless minority.

    1. banger

      Well that may be–the ignorance is a result that the current elites dominance of the political and economic sphere is the relentless mind-control regime starting with the Creel Committe and on down the line. This is the home of modern propaganda and the Mecca for the most creative minds in the world to ply their trade to control the minds of the people. Most of our consciousness is un-conscious and these guys know how to mess with it like musicians.

      Obama was the height of that mind-control system. Look what they sold “progressive”! That’s chutzpah and skill. Obama won the marketer of the year award, btw.

      Americans are beginning to wake up to all this crap they’re just incredibly weak because they are under virtual magic spells–they have to turn off the mainstream media and popular entertainments that broadcast negative messages. I’m a bit pessimistic that this can happen. Some of us have to work some counter-magic.

  3. sd

    I have the unfortunate history of having had too much experience with sociopaths, starting first and foremost with a parent who with the exception of murder (at least that I know of) meets all but one of the criteria of a textbook sociopath.

    The sociopaths have gained control of the world. They care only of themselves. They are sadistic. They enjoy and receive pleasure from the suffering of others. So far, the only way I have found to counter such behavior is through the acts of creation and generosity. Art, music, dance, smithing, carving, cooking, sewing, knitting, weaving, gardening, any activity that leads to creation is the antithesis of the destruction. The act of giving freely is the antidote to greed.

    So look around and say, what can I do myself? The very act of making your own bread and sharing it with others is the anarchy we so desperately need today.

  4. jake chase

    Lambert, on this one I agree with you. I have been saying this for five years and wrote a novel about it in 2008 in which I more or less anticipated everything which has since happened despite having no expert knowledge of CDOs or CDSs either.

    It is perfectly obvious that our elite and its toadying supporting class of professionals, academics and journalists care about nothing except their own profligate engorgement. Consequences to others be damned. It is worse now in America than it was in France before the Revolution. These MFs know they are personally invulnerable because they control all political decisions. The difference between fifteen million unemployed and fifty million unemployed is at worst inconsequential and at best positive for them. They view the destruction of the middle class as a plus. They have seen Mexico (on vacation, of course) and they prefer that kind of wealth distribution. Inasmuch as they live only in the air (airplanes and tall buildings) and on the coastal beaches, their physical concerns are accordingly limited and biased.

    What continually amazes me is why anybody in the country listens to anything they ever say?

    1. Jim Haygood

      ‘Inasmuch as they live only in the air (airplanes and tall buildings) …’

      … a lifestyle melding captured by the buzzphrase ‘helicopter views’ which graces this weekend’s Times-Titanic property advertorial:

      High-end projects in Manhattan … are proving so profitable that they are warping the local real-estate market, making it more difficult to put up more-affordable housing.

      The luxury building trend is driving up the overall cost of land in the city. Several developers maintained that they could build moderately priced housing only if they could get significant tax breaks.

      There are only two markets, ultraluxury and subsidized housing,” said Rafael Viñoly, the architect who designed the [84-story residential] tower on Park Avenue at 56th Street, which is called 432 Park.

      Presumably ‘subsidized housing’ includes prisons, where more than a couple of million americanos live.

      Hope them luxury towers have they own generators. Eighty-four floors is a long way to climb in a blackout.

      Serfs up, comrades!

      1. nonclassical

        ….the part I like, having paid $95 mill for the Penthouse Apartment (sold, by the way), + over $17,000. per month, is the “servant quarters”, some floors lower,
        at $1.5-$3.5 million per “studio”…

    2. Susan the other

      Reading Aesop’s Fables is always encouraging because all those tales try to caution against greed by using an interesting truth. Which is as Lincoln told us “…. but you can’t fool all of the people all of the time.” And once trust is lost it is never recovered. It is always changed. Trust is a good example of evolution. It isn’t a static thing. Just remember your parents, if you are old enough, who lived through the 30s and never trusted the banks or the stock market again and were extremely skeptical of real estate. That distrust ran so deep and was partially passed on to our generation that it created a condition whereby the Finance Industry had to think up all sorts of tricks to lure us back in. Which they did. But they regret it as much as we do. All this mess because corporations are trying hard not to pay livable wages. Sad and foolish.

      1. Susan the other

        The proof of it all is in legislation. The entire body of law. Statutes. Codes. Rules to live by. So it’s puzzling that we as a nation with all sorts of laws, inundated by laws and lawyers, has become ever more entrenched in distrust.

        1. anon y'mouse

          that’s not puzzling. isn’t that just an expression of some Freud/Jung thing about projection and the shadow side?

          either that, or the laws are a reaction to the simple fact that no one is operating with any honour, as to do so means you’ll be raped by those without it. honour becomes a fool’s game. contracts are where it’s at, then.

      2. Nathanael

        Susan: I was taught investing by my grandmother who grew up in the 1910s. So she actually lived through the ’29 crash.

        That distrust she taught me has stood me in good stead.

      3. nonclassical

        susan…which is reason it’s frozen out of mainstream media entirely…Seattle Times “Business” editor Bill Virgin is known to describe documentation of Wall Street “criminogenic accounting fraud” as “conspiracy theory”…

        (Times is conservative mouthpiece, of course..Blethen family)

  5. Moneta

    Because the US has the reserve currency, the biggest sector has been the money printing one for a few decades now.

    The most important quality of a money printer is its perma-optimism. That has been the single most important trait to move up the corporate ladder over the last few decades.

    Today, we are being led by a bunch of financiers who have no clue how the physical world works in relation to the paper one. Most have never once thought about how much energy is needed to keep the entropy going or which structures will survive and which will implode because they are too busy looking at how much paper money everyone is making.

    I’ve spent my career surrounded by the Canadian 1% and trust me, the vast majority is not plotting anything. All they do is salivate at American CEO compensation packages and spend most of their time scheming to get the same or at least as much as their peers. At suppers they talk about their wine fridges, boats and exotic trips.

    IMO, a lot of these clueless 1% will get sheared; but it has not crossed their mind yet.

    1. Elbridge Spaulding

      “Today, we are being led by a bunch of financiers who have no clue how the physical world works in relation to the paper one.”
      So very true, perhaps qualifying only being ‘misled’.
      And I believe this the likely result of two things.
      The first is not having read F. Soddy’s “Wealth, Virtual Wealth and Debt” – therefore not knowing the difference.
      And the second, resulting from the first, being our paper-issuing ‘monetary-asset’ class of rulers, a.k.a. the one-percent, who create all that serves as the nation’s monies by issuing monetary assets and collecting the rent thereon.
      To this end.

    2. Nathanael

      “IMO, a lot of these clueless 1% will get sheared; but it has not crossed their mind yet.”

      Yep. They live in a bubble, so they’re able to ignore the oncoming storm.

      It’s like Versailles before the French Revolution.

      I’m not happy about this because a lot of the “good guys” who were warning people about trouble before the French Revolution… got guillotined anyway.

      1. Another Gordon

        Very like the French Revolution.

        About a year ago I saw a BBC program about Versailles and the decades running up to the French Revolution and it was spookily like the situation in the US today. The government was perenially short of revenues – partly because of wars, but mainly because of a system which taxed only the poor (who, naturally couldn’t pay much) while exempting the aristocracy who repeatedly used their political power to block any move to tax their vast wealth. In the end they paid with their heads while Britain won the struggle for colonial supremacy.

        Those who ignore the lessons of history are condemned to repeat them.

  6. Cletus

    jake chase says:

    “What continually amazes me is why anybody in the country listens to anything they ever say?”

    It seems that you have nailed the crux of the problem.

    On one hand, we have the relatively small group of sociopaths who control the entire system — practicing their brand of sadism. On the other hand, we have the teeming middle class made up of both sycophant/inept sociopaths and willfully ignorant, self-hating masochists.

    I’m actually beginning to believe there’s something in our water supply that causes the majority of people to be docile. Any other generation of people at any other time in history would have seen this for what it is, by now, and would have put an end to it, one way or the other.

    Then again, maybe not. Rome went on for a long time as a war-mongering kleptocracy governed by sociopaths.

    1. Moneta

      I’ve spent the last decade telling fellow Canadians to not over-indulge in debt but to no avail. Everyone wants a free lunch. All I’ve managed to do is getting marked as too conservative or negative.

      It’s sad to say but we are getting what we deserve. It’s just Karma.

      1. Massinissa

        Trying to not become an indentured servant to the capitalist class is ‘conservative’ these days? Well damn, I guess that makes me a ‘conservative socialist’ or some other incredibly strange sounding oxymoron.

        Households are not sovereign governments: They cant get rid of their debt by creating their own inflation. Envisioning that household debt works like sovereign debt is probably even more stupid and removed from reality than the opposite.

          1. Massinissa

            I consider myself a libertarian socialist sometimes.

            But I can never actually decide what type of socialist I am, since there are so goddamn many types. I sort of feel like none of them really fit me. That, and Im not entirely sure I dont change what type I am every week or so, so there isnt any point figuring out what type I am that week…

            I just consider myself a ‘socialist’. What kind I am is other peoples business: I dont really give a damn what I am. They can label me all I want: I dont see much point in excessively trying to label myself. It might get me stuck in some kind of stringent orthodoxy if I try.

            At the end of the day, I suppose I am just me, rather than a specific category. That, or im just indecisive, or both.

        1. Moneta

          Go figure.

          Many in my entourage are convinced that real estate is better than paper assets and will protect them from inflation.

          What they fail to understand is that they are loaded with a time bomb (i.e. debt), and the only way they will come out of it unscathed is if they can manage to keep on generating the cash flow to service the debt through the turbulence inflation woud bring.

          1. Massinissa

            To be perfectly fair, if we go into hyperinflation, the debt shouldnt be that much of a problem…

            But I think the capitalist overclass is at least smart enough to prevent that from happening. Hyperinflation would be bad for their interests. That, and even though Austrians have been predicting hyperinflation for over half a century now, it hasnt happened yet… I dont think its in the cards in the immediate future.

            If theres no hyperinflation, then there is really no way those houses will accumulate real value faster than inflation, especially when you consider the interest on the debt. Theyre pretty much consigning themselves to debt peonage. And if they lose their jobs, which is MUCH more likely than hyperinflation…

            Well, theyre going to be totally screwed.

            Home ownership is just too much of a risk right now, especially in a turbulent economy. Its not worth viewing houses as anything more than a place to live. Viewing them as ‘investments’ is unwise.

          2. Moneta

            I don’t agree. Hyperinflation and big inflation would shake up the economy and generate big unemploymnent making it impossible for a large percentage of the population to keep on making their mortgage payments.

            Those who could keep on servicing the debt would win, but a large percentage would sink.

          3. Moneta

            And if deflation persists, as you said, they will remain debt serfs.

            The problem is that a large percentage of the population has bought into a material life that is too big for their britches.

        2. nonclassical


          Households are not corporate shell game orchestrators either-a homeowner can’t rid himself of “equity”=asset by paper debtizing=monetarizing….sending
          said now financial “asset” to offshore “secrecy jurisdiction”, to be brought back
          upon books as “debt” which can be written off…

          ..all the while propagandizing government (peasants) should pay down THEIR debt…

          (Satyajit Das, “Extreme Money”)

    2. Jim Haygood

      ‘There’s something in our water supply that causes the majority of people to be docile.’

      Broadcast mass media (which does not require literacy) began in the 1920s with radio. Television added images to the spoken words in the 1950s.

      There’s a lag time of about one generation to completely replace one set of values with another.

      Done …

      1. Nathanael

        Broadcast mass media is being replaced with the Internet. Which does require literacy.

        That’s going to change everything. (Again.)

        1. nonclassical


          “internet” will become U.S. educational device-end of public schooling…(after “charters” fail)..AND your new Samsung can view you…Orwellian surveillance..

  7. Hugh

    It’s interesting to see how people dance around the concepts of kleptocracy, class war, and wealth inequality. Apply these to the interview above and all the surprise and incomprehension melt away.

    Flassbeck says “What we have is the systemic malfunctioning of the system, system malfunctioning of the labor market, systemic malfunctioning of the financial markets.” This seems to me like a half statement. The system is indeed malfunctioning, as in not serving the interests of the 99%, but as an engine of looting and suppression of the 99% by the 1%, it is working just fine. The rich and elites may be evil and/or stupid but mostly they are criminal. They are not irrational. They will loot to a crash and then loot the crash. They will keep doing this until there is nothing left or they are overthrown. This is the essence of kleptocracy. It is the real system we have, and it is functioning exactly as intended.

    1. Brooklin Bridge

      For what it’s worth, many (and perhaps most) of these elites are aware they are not perfect, but not aware they are evil or even criminal. And that overlooks the fact that many of the players supporting the abusive relationship do not fit exactly, or at all, into the 1%. I’m thinking of a professional in the health care industry, for instance, who is the perfect example of a neoliberal and has sublime confindence that we must deal with the deficit, that everyhting Krugman says is gospel, that everything Obama touches is great or at least going in the right direction and who is utterly convinced that he (the doctor)is on the side of the good and the just.

      Moreover, much of the discussion in the comments is more interesting than in the post in that commenters question the why of the middle class and others as well as of the 1%. Why indeed do we – or so many of us – go along with this broken, or criminal, system? I’m not sure Lambert means it that way (applying to both the 1% AND the 99%) when he calls it, “the eternal question”, but since both sides of a pathological relationship (the abusors and the abusees) are important if there is to be such a relationship at all, it IS pertinent. Finally, I assume like objects, a system taken alone can’t be criminal or evil. Those qualities are imbued by the people who inhabit and use or are used by the system.

      I’m not arguing your points, except perhaps the implication that, it’s simple, (or easily understandable) “[if one applies the] concepts of kleptocracy, class war, and wealth inequality.” Those may indeed be useful concepts with which to look at it, but even then IT is still not simple or easily cleared up to understanding regardless of the tools you bring to bear or of which side of the abuse one examines or both.

      1. Moneta

        We go to university to be part of the elite. And many who don’t go still think they can realize the American dream if they work a little harder. People want to believe they will be part of the winners.

        As long is this hope stays alive, nothing will change.

      2. Brooklin Bridge

        I mistakenly placed a comment about the doctor in the main thread below that I wanted to end up here as an elaboration of my comment above.

      3. Massinissa

        “who is the perfect example of a neoliberal and has sublime confindence that we must deal with the deficit, that everything Krugman says is gospel”

        Isnt this statement contradictory?

        Firstly, Krugman is a Keynesian, not a Neoliberal. Secondly, although I dont follow Krugman much, doesnt he usually advocate AGAINST austerity?

        1. diptherio

          From what I can tell, Krugman still adheres to the “neo-classical synthesis,” which isn’t quite as bad as straight neo-liberalism (perhaps) but is fundamentally flawed, nonetheless.

          Krugman thinks austerity is bad while we’re in a recession but he still thinks the deficit needs to shrink eventually. I’m pretty sure he thought the Clinton surplus was a good thing (along with most of my econ profs).

        2. Brooklin Bridge

          As I understand it, Krugman is against austerity, particularly during a recession, but also believes the deficit must be dealt with. I don’t read his stuff much either, but when I do, that is the message I come away with. As to neoliberal and the contradiction (I would say conflicting), I think you have a point, but this doctor sees nothing wrong with the government acting as Guido and the Insurance industry acting as a vacuum cleaner – he thinks it will eventually transform itself into single payer (I would guess he imagines market forces would be at work) – and that strikes me as more neoliberal than Keynesian whether or not if conflicts with Krugman’s viewpoint. Still, he hangs on Krugman’s every word whether or not his own view point is always consistent. But I’m not wedded to the term. What I’m getting at is that the doctor is one among many who believe in the fundamental rightness of the system as is and that the only fly in the ointment are those pesky frightening Rethuglicans. The sheer numbers of such people and their aggregate power or infuence makes understanding our current situation very complex indeed. It certainly can not be explained to him by the concept of theft and criminality, and his own belief in being on the side of good presents problems with such explainations in general.

          1. Massinissa

            The sad part is, most of what youre saying about Liberals like this doctor, is exactly the same for many Republicans (feeling they are on the side of good and righteousness and never realizing their own side is part of the problem, etc etc).

            I do feel sometimes that at the end of the day, the Conservatives and Liberals are more alike than different, at least in their delusions.

    2. Lambert Strether Post author

      I have long advocated a return to “honest graft” as opposed to the insanely destructive greedfest we now labor under. I’m not sure that a kleptocracy instrinsically sorts sociopaths to the top, since that would tend to “kill the host,” no? (Or converesely…) Boss Tweed did a heck of a lot less damage than Jamie Dimon et al, no?

      1. Nathanael

        Look up “Tweed Courthouse”. There came a point when the graft was so large that it prevented the building from actually being finished. That was the point at which the parasite killed the host.

        We’re seeing something like this again. It is, perhaps, most likely that the current unsustainable system will be replaced with one where the parasites *don’t* kill the host. But the replacement process is UGLY.

        1. Lambert Strether Post author

          Ultimately, though, there was a courthouse, which still exists today (and is in fact rather lovely, and so it should be). Not the same as misallocating billions of dollars into housing with stucco-covered styrofoam pediments and no insulation. Or into M-M’ electrons for that matter.

      2. nonclassical

        “Massin”…not quite alike, though bushbama is DLC “house negro”…but conservatives today are so anti-government-the “Project For A New American Century” – manifest destiny version bushitters invented they no longer feel any
        necessity to advocate democracy, or “the people’s representative government”..
        rather going about destroying government when in power, and obstructing government when not in power…

  8. Eureka Springs

    When our nation is led not by bleeding heart liberals but led by humanitarian bombing, eating heart liberals… the system is indeed entirely corrupt. It’s way past time to demand self-examination of each and every one in society as much as playing the blame game.

    We need very simple bullet point lists which describe the problems rather than posts like this which would bore the hell out of at least 85 percent of those who need to be included in revolt.

    We need rule of law at the top. FIRE and war crimes being at the top of the list, followed closely by the abuse of the secret and police apparatus.
    We need the ability to publicly assemble without threat of arrest, tear gassing, usurpation of assemblies by the police state etc.
    We need to end the bribe based political and electoral system. No negotiation, no half measures such as what move to amend suggested.
    We need more direct democracy such as the ability to amend by referendum rather than relying on the corrupt system to represent.
    We need SOLIDARITY, general strikes. Until public assembly can be conducted safely. solidarity strikes can and should be conducted in other ways… such as millions of people shutting off their breaker switch at the pole for a day at a time.
    We need to understand and admit how the 99 percent are culpable/enable the systemic corruption mentioned in the post and how to stop it or at least minimize – delegitimate.

    1. banger

      I don’t think there’s any simple way to deal with our situation. We are dealing here with issues that go beyond anything human beings have ever faced.

      At the deepest level we each face a choice between moving towards connection or towards radical alienation. We have to choose between fear or love and most, today, chose fear. Out of that choice our toxic elites rise and no amount of laws will change anything. Solidarity, which you rightly post about here, is essential but it can only occur out of love and connection with others that’s why, despite the obvious evil of our elites we do nothing–because we are separated and alone–we believe human beings are first “individuals” who are “independent” that’s total fiction–we are individual and important but within the context of larger wholes whether it’s nature or our neighborhood.

      I mean we have our work cut out for us but it is, believe it or not, an “inner” work that consists of dropping the fear, the anxiety, the alienation (that is programmed into us by the evil elites for their benefit) and opening our hearts fearlessly even if they are broken every day. If we can each do that it will create huge winds that will blow the whole house of cards down–because the system exists only because we allow it exist as reflecting our inner states.

      1. Doug Terpstra

        Deeply wise, Banger. The love or fear response is a moment to moment voluntary choice, a habit-forming behavior that either transcends or succumbs to the involuntary, unconscious flight-or-fight reflex in which we are indistinguishable from other Darwinian animals. Divisiveness is key to maintaining a manifestly evil system and that is why the elite so vigorously shove fear and its conjoined twin, anger, down our throats. And this is why the war on terror is such a brilliant Orwellian propaganda weapon. Its unidentifiable, irrational, and omnipresent enemy terrorists of indeterminate nationality and “inferior” race are infinite and invincible, the perfect enemy for perpetual war.

      2. nonclassical

        …follow the $$$$…”WE” didn’t “ALLOW” Wall $treet financialization to DEregulate their way to $600 trillion, derivatives, 95% held by 6 U.S. “investment banks”, 80% of which exists in “City of London”=British Wall $treet parallel…

        don’t blame the VICTIMS…

    2. anon y'mouse

      average American doesn’t need bullet point lists. he’s already been influenced by the think tanks and propaganda-meisters against such things, and has made up his mind. besides, if -I- can read and understand this post, then so can (s)he.

      the truth is, as long as the play well tomorrow and give good water-cooler chitchat, they don’t care.

      i’m all for a good general strike. hard to ask people who NEED a paycheck because they are one away from homelessness to participate, though. I honestly believe most are in Diffusion of Responsibility and Pluralistic Ignorance mode, and simply hope that they can afford to fix the broken water heater and replace the roof next before next year’s rainy season. those are large enough problems without solving the government, climate change or world overpopulation.

      keep ’em scrambling for scraps (and crawling over each other for them) and they’ll never have time to challenge the powers-that-be.

      1. nonclassical

        …what do we suppose it was for, all those bank credit card=debt sales jobs, ’90’s through 2000’s..? What did people think when bushitters allowed credit card lobbyists to actually write new “bankruptcy law”, 2005???

        ..we thought millions of Americans were going to go bankrupt…

    3. Massinissa

      “Eating-heart liberals”

      That is brilliant. Did you coin that or find it somewhere? I surely need to start using that.

      1. Eureka Springs

        As far as I know I coined it in my brain this weekend.

        Thank you, thank you… ***takes a bow***

        1. AbyNormal

          smooth writing Eureka and im taking ‘eating heart libs’ with me…sure to blow some southern minds at the charity drop-offs’)
          take another bow!

  9. F. Beard

    “Somewhere someone has to be a debtor, because savings and debt always nets to zero. …”

    Always with the debt! The monetary sovereign can deficit spend without borrowing and yet many still insist on calling that “debt” too! But what does the monetary sovereign “owe” if it deficit spends without borrowing? ans: Nothing except to accept back the fiat it created for taxes and fees.

    And the implicit argument from the above quote is that people in aggregate must ALWAYS be in debt either directly or indirectly through their government. Says who? Bankers and other usurers?

    1. Susan the other

      good point. Flassbeck sounds good otherwise. It brings home the European reality of paying down the debt no matter the social destruction. But then, they blame our financial scams for blowing up their system. So being too rational about the nature of debt doesn’t fit into their rational framework yet.

      1. F. Beard

        Many see money creation by the monetary sovereign as harmful “dilution” ignoring:

        1) The banks engage in “dilution” every time they make a loan (“loans create deposits”) and to add insult and further injury to injury they charge interest for that privilege too!

        2) Deflation is built into bank loans since they must, of course, be repaid.

        If money is the “lifeblood” of an economy then isn’t it absurd that that lifeblood is lent into existence? How does one payback a “blood-debt” (plus interest!) without injuring or killing oneself?

    2. Calgacus

      The monetary sovereign can deficit spend without borrowing and yet many still insist on calling that “debt” too! Because it is a debt. Look at a dictionary. It
      fits the definition of debt. Human beings have a very deep intuitive understanding of debt. It is utterly crazy to avoid it when understanding the particular kind of debt called “money”. That’s what gets people into the crazy traps called “commodity money” and neoclassical economics. Even if they think they are avoiding, even fighting these delusions, that is what will and does happen.

      But what does the monetary sovereign “owe” if it deficit spends without borrowing? ans: Nothing except to accept back the fiat it created for taxes and fees.

      It’s a general principle. If you owe something, you don’t owe anything except what you owe. The sovereign owes to the individual what the individual receives in return for paying these taxes and fees. (see below) Not worth saying, except that an awful lot of “economics” does crazy gymnastics to confuse such things.

      It is reasonable to call sovereign spending “borrowing” (much more reasonable than calling “government borrowing” borrowing, which it just ain’t). Before the sovereign spends, it don’t owe nobody nothing. After, it does. A sovereign spending for something of real value is exactly the same transaction as somebody doing a favor for someone else, in return for an “I owe ya one”. That’s a debt. A purchase on credit.

      Sure, sovereigns could spend like crazy = hyperinflate. But they never do. Hyperinflations are always something forced on states by the real world. The closest, chronic inflation – is something that usually comes from accepting the neoliberal, neoclassical paradigm – which just doesn’t make any sense. Not surprising. If you believe that gravity pulls things up, you aren’t going to design safe buildings.

      Sovereign spending is historically a quite meaningful debt of the sovereign. Which is why we use it as money. Which is why sovereigns make their favors scarce. The taxes and fees the sovereign requires generally pay for things people consider quite valuable – the right to earn an income, to own property, to do bidness, to stay out of jail, to keep their lives. That’s why they people pay these taxes and fees. They are buying something from the sovereign. And the sovereign makes them hard to get. Although nowadays he is smart enough to only sell things that (only)HE has an infinite supply of.

      He wants real value for the spending, the purchases on credit that he makes, that make him indebted. In a sane economy, the sovereign has a JG program, so you have to work an hour say, to get $10. The sovereign never just gives his money/favors away for nothing, at least not to everyone.

      The whole point of MMT, of Keynes etc is that modern sovereigns tend to make their favors, their money so scarce that they defeat the whole purpose of having a monetary economy, which is to organize economic activity and production for public purposes, usually including allowing private purposes to more or less freely be pursued, at least in principle.

      1. F. Beard

        Sure, sovereigns could spend like crazy = hyperinflate. Calgacus

        So you equate deficit spending without borrowing with hyperinflation?

        Let’s cut to the chase. Do you believe that a monetary sovereign should borrow money?

        1. Calgacus

          Calgacus: Sure, sovereigns could spend like crazy = hyperinflate.

          F Beard:So you equate deficit spending without borrowing with hyperinflation?

          Of course not. I am for “deficit spending” ZIRP, just printing fiat money. Just not ad infinitum – “like crazy”.

          Let’s cut to the chase. Do you believe that a monetary sovereign should borrow money?

          Of course not. Not only do I believe that Monetary sovereigns “should not” borrow their own money, I know and understand that they CANNOT borrow their own money, any more than they can make 2+2=5.

          What is called “government borrowing” IS. NOT. BORROWING. the way the word “borrowing” is used in any other context.

          True (financial) borrowing is A giving B A’s IOU in return for B giving A B’s IOU.

          2 points: 1) This is idiotic unless one of As or Bs IOUs is “much better” than the other.

          2) This is fundamentally, structurally a symmetric relationship. Borrowing is the same thing as lending!

          The difference, which makes one “the borrower” and one “the lender” is who has the bigger, better IOU, and this is almost always reflected in the interest rate, terms etc. US government dollars always trade above par in terms of say Chase Manhattan dollars. They are higher up on the pyramid of money. Modern sovereign states are the top of their own pyramids, so they CANNOT borrow from their private banks, by definition of “borrowing” and assumption that they are on top of the pyramid.

          Internationally, the top of the pyramid, the reserve currency, is now the USA & the US dollar. In the 19th century it was the UK and the UK pound. The USA cannot now borrow money, borrow financially from ANYONE, in US dollars or not! Because anybody would call that identical transaction – “lending US dollars” (or if the terms are really nice to the other guy, lending + “giving US dollars”).

          The only way that the US can “borrow” is directly, non-financially, by spending. That’s like going to a neighbor and saying “can I borrow a cup of sugar to bake a cake”. You get the sugar, the neighbor gets the IOU. You are in “financial” debt to the neighbor. But you got something you value from him.

          Crucially, you don’t have to repay in sugar. The neighbor might allow you to settle the IOU by mowing his lawn, watching his house when he is away, etc. This is parallel to the government receiving taxes or running a government store. Financial debt of the government settled, private individual receives benefit.

      2. F. Beard

        In a sane economy, the sovereign has a JG program, so you have to work an hour say, to get $10. Calgacus

        A sane economy would not have a government-backed usury for stolen purchasing power cartel so would not have to resort to make-work programs for the victims of said cartel.

      3. F. Beard

        Also, if the monetary sovereign never ran surpluses and sometimes ran deficits without borrowing, then debt-free fiat would accumulate in the economy and should more properly be call “private sector equity” since the private sector’s tax assets would exceed its tax liabilities (E = A-L).

  10. banger

    The subject of what motivates the power-elite is fascinating isn’t it? Well the first thing we have to do is understand that power, not money, is what drives the elites. The will to power is based on fear and alienation. The international power-elite live to have power and if that means personally losing money then so be it.

    For example, if you are rich in a commercial society that’s great but can you legally torture children if you feel like it? To be able to walk out your 5th Ave. apartment with your posse and just grab someone off the street and kill them with impunity–that’s power! And that’s what these power elite want–ultimate power over others Not that most would admit to even consciously want that power but they are moving in that direction. Some are aware of it–watch Kubrick’s last and (in my view) greatest work *Eyes Wide Shut* which explains where we’re at better than I could with words.

    What I’m saying here is that pure evil does exist and our power-elite are moving in that direction. I had a “crazy” friend who lived usually in another world yet he could sometimes see this one with great clarity. He foresaw the time we live in very clearly–he said that the anti-Christ was a collective spiritual state not a person and that he believed, forty years ago, that this collective spirit of fear, alienation and greed would take something like a virtual shape. I think he was right. What we are facing here is a moral challenge more than a political/economic one. We have to take a stand on what positive things we stand for and expand our circle of love to counter this black-cloud that is beginning (yes, just beginning–they are not even close to being done) to blot out the sun.

    1. Moneta

      The 1% is a mix of those who want power and those who only thirst for money and name dropping.

      If you want to bring them down, you have to be able to tell them apart.

    2. nobody

      “The real pornography in [Eyes Wide Shut] is in its lingering depiction of the shameless, naked wealth of millennial Manhattan, and of its obscene effect on society and the human soul. National reviewers’ myopic focus on sex, and the shallow psychologies of the film’s central couple, the Harfords, at the expense of every other element of the film — the trappings of stupendous wealth, its references to fin-de-siecle Europe and other imperial periods, its Christmastime setting, even the sum Dr. Harford spends on a single night out — says more about the blindness of the elites to their own surroundings than it does about Kubrick’s inadequacies as a pornographer. For those with their eyes open, there are plenty of money shots.

      “There is a moment in Eyes Wide Shut, as Bill Harford is lying to his wife over a cellphone from a prostitute’s apartment, when we see a textbook in the foreground titled Introducing Sociology. The book’s title is a dry caption to the action onscreen (like the slogan PEACE IS OUR PROFESSION looming over the battle at Burpelson Air Force Base in Dr. Strangelove), telling us that prostitution is the basic, defining transaction of our society. It is also, more importantly, a key to understanding the film, suggesting that we ought to interpret it sociologically…”

      1. banger

        There are indeed a lot of things to look at in the movie. SK is more than a mere maker of interesting films or a polemicist–he’s an artist in the fullest sense of the term as that role has developed in Western Civilization. My point is that the depiction of the elites and the power and muscle they possess is stunningly accurate. I assure you that if f!ck with the wrong person you’re going to be stopped, discredited or just die whether you’re some Walmart worker or the POTUS.

        1. nobody

          It’s a shame that the cut we have is not the director’s cut, maybe not by miles and miles.

      2. mansoor h khan


        I think it was Plato who wrote that civilizations processes along this path:

        Chaos -> Monarchy -> Aristocracy -> Democracy -> Collapse -> Chaos

        To the above model I think we should add:

        Chaos leads to quest/hunger for spirituality and search for god because life is so much more difficult in chaos.

        As religious beliefs consolidate with time social order and stability grows, scientific knowledge grows, cooperation grows, specialization grows and a flourishing new civilization is born–>


        The once a civilization grows powerful: Faithlessness grows, selfishness increases and corruption and cheating increase leading to collapse/Chaos again!

        This is similar to what Spengler wrote in Decline of the West,

        That is why I believe spirituality will come back in full force post collapse (inshallah).

        1. banger

          Yes, because in this particular time there is no other way open to the future–every other door is closed. Strictly materialist values will not enable humans to deal with climate change–only understanding how things are connected will enable us to deal with the large-scale problems we face. Wonderful to know that there are others posting who understand this.

          1. mansoor h khan

            All religions think this way! They emphasize our connectedness and individuality (and not just our individuality as the western society has become, much too left brain oriented):

            Left Brain:

            1. Logical and Rational and Detailed Oriented
            2. Helps us to deal with the material world (hunger, need for water, shelter, sex, etc.)
            3. Embodies Discipline (the goods and services production process, the Judicial System, the Military)
            4. Embodies physics and physical laws
            5. Uses strict hierarchy
            6. This is the focus of the old testament (eye for an eye!)
            7. Symbolized by the Roman Empire and focus of Greek thought
            8. Symbolized by the state (as opposed to the individual!)
            9. Embodies submission and compliance (Opposite of freedom!)
            10. Cold, strict and impersonal (opposite of warm, flexible and forgiving!)
            11. Focuses on this life (as opposed to a possible after life!)
            12. Has a difficult time with coming up with new models or theories or ways of solving problems
            13. The left brain will take a civilization over a cliff when the civilization encounters a problem requiring adjustment to the models executing (like a computer executes code) in the left brain if not restrained by the more “flexible” right brain

            Right Brain:

            1. Creative and Imaginative and Artistic and is able to have higher order logic and higher order rationality (dealing with the whole picture).
            2. Able to come up with fresh approaches, new models and new theories and new ways of thinking about the natural world
            3. Embodies emotion (love and hate), falling in love, patriotism, empathy, motivation
            4. Is able to increase the spirit, the desire to live, the desire to fight, the desire to carry on
            5. Is able to conceive of infinity (in time and space) and even in power (able to conceive omnipotence)
            6. Wants to procreate (one way to defeat death in a sense!)
            7. This is the focus of the New Testament (mercy, love and forgiveness!)
            8. Symbolized by the Persian Empire and focus of much of eastern thought
            9. Focuses on the individual and freedom of the individual
            10. Is in control of person’s free will
            11. Is able to conceive of and focus on after life

            I will go a step further and say that:

            It is the right brain which guides and teaches the left brain. But left helps to keep the right nourished and healthy on the physical level.

        2. nonclassical


          Jidda Krishnamurti-“Religion has been given thousands of years to cure man’s ills-should we give it thousands more?”

          1. mansoor h khan


            It is a built-in cycle in the creation by God (the creator) to keep reminding people who is BOSS. Today’s man thinks he is boss and that is the main problem.

            True Belief in God and Afterlife = Promotion and Practice of Good Values in this Life including fighting and struggling for fairness and balance in society

            Lack of true Belief in God and Afterlife = Eventual Collapse, Chaos, Famine and Search for God by those who survive, at this point faith becomes a survival advantage because it is far too painful to live just for joys of this life

            This is nothing new. Read Oswald Spengler. All religions teach this!

            mansoor h. khan

  11. diptherio

    This important sentence got mis-transcribed:

    FLASSBECK: Well, I think they’re not as smart as you think. They are, because if they were that smart, they would understand that it cannot work in that way.

    This should read

    Well, I think they’re not as smart as you think they are, because if they were that smart, they…

    The way it is now, Flassbeck appears to be arguing with himself…they’re not that smart…yes they are! ;-)

    1. JTFaraday

      I think he’s basically saying real economy corporate leadership is “short-term smart,” as a narrow special interest faction, because they’ve rigged compensation arrangements that pay off for them, personally, in the short term.

      They’re not “long-term smart” because the nature of their rigged arrangements damage their corporations and the economy around them, by broadly damaging the consumer base upon which real economy corporations ultimately depend.

      It could be that they’ve made the same bet that German corporations claim they’ve made. ie, that they can risk undermining the local consumer economy by cutting local labor costs because they can pick up business in the emerging markets.

      I can’t say if that thesis is right or not, but maybe they don’t care if it’s right in the long term so long as it’s viable in the short term.

      ie., “I’ll be gone, you’ll be gone.”

      1. diptherio

        Oh, I know what Flassbeck means, I was just pointing out a typo (because I literally can’t help myself). It’s one of those “woman without her man is nothing” situations, if you know what I mean…

        1. JTFaraday

          I do, I do. I’m rather of the opinion that in the absence of Henry Ford like figures suggesting that building a consumer economy is the Road to Wealth, that the public is more or less without ally in the governing elites.

          I don’t know, maybe that’s a grammatical problem of some sort.

  12. Brooklin Bridge

    The doctor fascinates me in that even though he only plays a supporting role in the grand scheme of pathological systems, I think he and his situation has a lot of interesting similarities to those at the top. For one, as a doctor, he is in a power relationship to those around him. Nurses, orderlies, patients, etc., DO NOT question him or at least his authority. The “administration” think of him as bread and butter combined. Even the insurance companies are deferential when they tell him exactly how to spend every second of his day. So when he states an opinion, he has come to have a special somewhat distorted sort of confidence in it’s rightness. Software engineers and Steam Boat captians once had (and some still do) similar issues. But the doctor in question is really a caring person. He WANTS people to have access to medical care. He WANTS people to live happily and with economic security. And yet he deeply believes in the Democratic party and it’s ultimate goodness. He doesn’t see the constitution being shredded before our very eyes. He instead sees a temporary necessity that will work itself out. He is clearly very influenced by those parts of the main stream media dedicated to propaganda at his intellectual wave-length. And he, along with millions like him, constitute a huge force in our current dilemma that is anything but easily understood.

    1. Brooklin Bridge

      The above comment was intended to be part of one I made above under Hughs comment.

  13. diptherio

    I like Arthur Silber’s recent suggestion of building narrow alliances with “right-wing” groups (TEA Party and Libertarians) in order to attain a critical mass of social protest. ‘Cause really, all we’ve got is numbers. Silber points to instances of the “strange bedfellows” phenomenon in the abolition of slavery, as one example of this strategy working.

    During our Occupy encampment, I ended up calling in to our local right-wing talk radio program to defend Occupy against their charges of being a union front. They ended up keeping me on the line for a full hour, I ranted about the bank bailouts and ended up being told by a caller and the host that I should “run for office.” I’m not trying to took my own horn with that anecdote, just saying, this is possible.

    Left, Right and Center, we need to see past our differences to the one thing we can ALL agree on: Wall Street and Washington need a thorough cleansing. Massive tax-protest until the guilty parties are held to account.

    1. Brooklin Bridge

      Being part of OWS and ranting to a conservative talk show is, frankly, good for a lot of tooting, and that’s before the response you got which definitely deserves a few more toots! Loud ones!!

      BTW, I keep thinking the same thing about intersecting points of interest, and then I get a email such as the following snippet from a chain letter sent by a conservative friend that all but deflates such hopeful notions:

      “I walked down the street in Barcelona and suddenly discovered a terrible truth – Europe died in Auschwitz … We killed six million Jews and replaced them with 20 million Muslims. In Auschwitz we burned a culture, thought, creativity, talent. We destroyed the chosen people, truly chosen, because they produced great and wonderful people who changed the world.

      The contribution of this people is felt in all areas of life: science, art, international trade, and above all, as the conscience of the world. These are the people we burned.

      And under the pretence of tolerance, and because we wanted to prove to ourselves that we were cured of the disease of racism, we opened our gates to 20 million Muslims, who brought us stupidity and ignorance, religious extremism and lack of tolerance, crime and poverty, due to an unwillingness to work and support their families with pride. […]”

      1. diptherio

        Well, this is why the coalition has to be very narrow. We’re not going to all hold hands and sing kumbaya around the campfire or anything. But we can all agree on the bank thingy…and maybe if your conservative friend meets a few Muslims at a “kill the banks” protest, his views might change.

        1. Brooklin Bridge

          We’re not going to all hold hands and sing kumbaya around the campfire or anything

          Bit of a gloss there. I see fundamental issues that would suck the oxygen, and anything else useful, out of most if not all “shared” positions.

          1. Lambert Strether Post author

            I keep thinking of something time-based. In “the first half” we’d end the empire and de-bloat the banks. In “the second half” we’d, er, handle the cultural issues. That’s not going to make people with Grand Unified Theories very happy. There would need to be some sort of Concordat; heck, an exchange of hostages. I’d want more information about work on the ground, because of course the political class would do all in their power, which is a lot, to prevent any such thing from happening. Plenty of kayfabe, as vile and vicious as need be.

            I’d note, however, that in the great State of Maine, the East West Corridor (potentially transnational sacrifice zone right across the state) has for now been halted, and everybody from the Portland goo goos to the guys with beards in the woods made that happen. I’d be interested to know if anything similar has happened in fracking. Health, food, and the land seem to be a lot easier for people to unify around (though of course the land gets all mixed up with property rights…).

          2. Brooklin Bridge

            @Lambert, down here in “Taxachusetts”, my own group of conservative friends (some of it is geography, some accident of childhood friendships) are consistently against what ever I am for and visa versa. For whatever reason they LOVE the XL Pipeline. They love Pharmaceutical. They love Torture. They love Drones. They Love tasers -LOVE LOVE LOVE em- and cops never ever misuse them. They Love Boots On The Ground in Boston. On and on, even when it seems to conflict with their own philosophy of “individualism” as in authoritarianism – or synchronized a*s-licking (I know, I’m unaware of my own contradictions). Anyway, Liberals/Conservatives are at each others throats if they so much as open their mouths on “the issues”.

            The same can NOT be said of libertarians or socialist libertarians who share points of view with both “main” tribes, but I don’t seem to meet many of those here in the land of more-by-laws-please.

          3. banger

            Don’t agree at all. The main issues between me and right-wingers I meet are trivial (at least in the larger scheme of things) and are mainly cultural. The main source of an alliance is power. Both the real left (not the fake one on MSNBC) and much of the populist right is opposed to a ruling elite and a mainstream media we find toxic. That’s enough for me to start. In fact, the populist right is the only real opposition group in this country–the left has disappeared–I mean where is it? Occupy is dead and there is nothing else. At least the right is stockpiling guns and ammo just in case the police state gets worse. Not that it will stop it–an, btw, I know people like that pretty well and they’re not the monsters intellectuals often think they are.

          4. Brooklin Bridge

            @Bangor, Both the real left (not the fake one on MSNBC) and much of the populist right is opposed to a ruling elite and a mainstream media we find toxic.

            I’ve tried that approach and it works for a very brief period, and only if one or both parties studiously avoids touching on most topics beyond the tearing down part. I think that sort of coalition was part of the phenomenon that took place in Egypt and the result has not been good.

        2. Brooklin Bridge

          Anyway, strange bedfellows may be the only way to proceed like it or not, willy-nilly.

        3. Brooklin Bridge

          I wish there was a delete (ones own) comment button.

          Some sort of coalition of forces will be very probably be necessary. moreover, I agree with Massinissa that at certain levels Conservatives and Liberals have far more in common than they would imagine (even if it is in their misconceptions). And you are right, campfire songs and shared marshmallow sticks may not be a major component of radical change.

          1. nobody

            Gar Alperovitz had some interesting comments about conservatives and people of the left working together, specifically on worker-owned co-ops in Ohio. If I remember right, that portion of the interview is around the 30:00 mark.


      2. Massinissa

        “The contribution of this people is felt in all areas of life: science, art, international trade, and above all, as the conscience of the world”

        The irony here is that, the EXACT SAME SENTENCE could actually be said of historic Muslim culture. It actually would be more fitting, at least in terms of science and art, for arabs and persians than jews.

        Of course, modern arabs and persians are pretty damn far from Muḥammad ibn Mūsā al-Khwārizmī (famous mathematician, introduced decimal number system to the west and reintroduced algebra to the west. Algebra comes from Al Goritmi, the Latin transliteration of his name. He was thought to be the father of Algebra until it was recently revealed that he drew upon earlier latin and greek works), but its not like modern Israelis have all that much in common with famous jews from centuries ago either.

        And lastly, I must say, modern Israeli’s are not really paragons of religious tolerance (Or even racial tolerance towards black jews, for that matter).

        But my last comment is, it must be recognized that *most* conservatives are not the blatant crazy rascists this acquaintance of yours is, and this type should probably be avoided when seeking to make any bargains with the right.

        1. Brooklin Bridge

          But my last comment is, it must be recognized that *most* conservatives are not the blatant crazy rascists this acquaintance of yours is, and this type should probably be avoided when seeking to make any bargains with the right.

          Agreed, including my acquaintance most of the time. As to liberals and conservatives of a more enlightened bent working together even to bake a cake under the compelling gaze of a rifle, I have strong doubts that anything other than a military takeover would result, but that does not contradict your point that both groups have merit, and thank goodness, it doesn’t mean I’m right.

    2. nobody

      “We’ve got to figure out how do we transcend these barriers and work together, even though we’ve got all these biases. The biases are not going to disappear just because we embark on this road. We’ve got to work with white people who are racist, in spite of the racism. And urban and rural people are going to have to figure out how to work together because we all have the same type of economic challenges, and social challenges throughout the state, throughout the country.

      “We got to do some things different at the grass roots level.”

    3. banger

      I’ve been calling for this for years. Most people on the left support the mainstream media narrative and think NPR and the News Hour are just fountains of truth rather than propaganda for grown ups.

      I live in the South so there’s a lot of people on the right who don’t buy the media narrative but are easily confused by oligarch-funded PR campaigns but they are ripe for an alliance. Silber has the same skepticism for “liberalism” that I do and Chris Hedges has documented.

      1. Lambert Strether Post author

        I keep saying that if Rush Limbaugh sounded like Garrison Keillor, the NPR-listening liberals would have no trouble with him at all. Class and cultural markers all in order? Alrighty then!

    4. MaroonBulldog

      See “Republic, Lost” by Lawrence Lessig. Compare “A Capitalism for the People” by Luigi Zingales. Leftish Lessig and Libertarian Zingales have basically the same criticism of the current lobby-election finance-regulatory capture crony corruption system, which stifles the goals of the left and the right at once. That’s why left and right both dislike President Obama. The right sees him as a bolshevik, the left sees him as a menshevik. He’s neither a bolshevik nor a menshevik really. He’s just the current leader of the corruption system.

      1. nonclassical


        I operated upon the similar dislikes basis-informed Washington State conservatons Inslee had one of lowest “bought and sold” quotients in Congress, when he ran for governor….

        conservatons dismissed this as “anti-business”, and unable to run a business…

        fortunately Washington is blue state…


  14. JGordon

    “So how can you have all the sectors saving? It’s impossible. It’s absolutely impossible. But it’s not allowed to talk about it.”

    This is a statement that’s several levels removed from reality, requiring multiple (false) implicit cultural and ideological assumptions to have any validity at all. This is a statement that confuses a self-referential imaginary fantasy world of semiotic symbols and wishful thinking with a real world that has finite (and rapidly dwindling) energy, mineral, and biological resources available to it.

    Fiat money based on interest-bearing debt is great as far as operating and expanding an industrial economy goes. But I view people who argue for that in the same way I’d view someone who was arguing for a really ingenius way of committing suicide–I mean sure it could work, but more importantly why should you even want to do that in the first place?

    1. Don Levit

      I can see how the author believes the corporate sector to be huge savers.
      But, what does he mean that the individual American is a net saver, although smaller in the aggregate than the corporate sector.
      If the average savings rate is around 3%, and one considers the rise of private debt, it seems the typical saver is well, not very typical.
      Don Levit

    2. Calgacus

      “So how can you have all the sectors saving? It’s impossible. It’s absolutely impossible. But it’s not allowed to talk about it.”

      Not at all removed from reality. He is speaking of finance, so what he is saying is true beyond rational dispute, no cultural and ideological assumptions. None that all humans don’t share with chimps, at least. He doesn’t mention “energy, mineral, and biological resources”, so how could he be confusing finance with them?

      Fiat money based on interest-bearing debt Fiat money isn’t based on interest bearing debt. That’s like saying the (presumably questionable) value of one dollar bills is based on the (presumably obvious) value of ten dollar bills.

  15. Michael Hudson

    Right, Lambert, re 0.75% student loan interest leaves the debt in place.
    The basic point: Shylock’s loan for the pound of flesh was a zero-interest loan!

  16. Bruce Wilder

    We are doomed.

    If the closest thing you can realistically come to hope, is hope for a system collapse — that’s pretty hopeless. But, I think that’s what realism gets you.

    The big mistake of 2008 was letting people like Bernanke define policy in terms of preserving a dysfunctional system. Everywhere, and all the way down to the suburbs and exurbs, our collective “vision” is preserving a system that no longer works, that hasn’t worked well in a long time.

    The pathology of the elite at the tippy top is matched by detachment and denial at the bottom. “You can’t cheat an honest man,” my father advised. The conman depends on both the trust and the greedy dishonesty of the mark, especially the greedy dishonesty. Our desire for hope, our insistence on hope, is being used to get support for preservation-ism. Because the alternative — the realistic alternative — is “hope” for system collapse.

    The outsized share of income going to the top 1% can only be generated by disinvestment. You can see it in the numerous nonprofits being driven into the ground, trying to pay big bucks to their executives; this is the end-game. The political economy is being consumed from the bottom-up, to maintain “prosperity” at the very top.

    It cannot go on indefinitely. Eventually, the stock of capital runs out. The infrastructure ages into obsolescence. The social insurance is gone. The electricity fails more and more frequently. There are more and more people, who can find no jobs because there are no jobs; the capital stock for those jobs has been liquidated to fund the fortunes of the 1%.

    We are descending an uneven stairs. In 2008, we stepped down quite far. About 5% of jobs disappeared completely in the U.S., leaving that much of the labor force unemployable. Oddly, the crises in Europe and China are putting off the day of reckoning in the U.S. Financialization in the U.S. depends on Europe and China not having fully functional currencies and financial systems. So, the U.S. will be able to paper over its unsolved problems, while they continue to get worse, and the economy is eaten away from the bottom-up.

    When Europe and China begin to recover, or stabilize, the U.S. will face another step-down — a big one, a drop off the cliff. But, that’s a year or three or five away.

    1. Bruce Wilder

      Silly to reply to myself, but I forgot my main point: any reasonable policy that arrests the disinvestment will cause the bubblicious wealth and outsized incomes of the 1% to collapse.

      It is gradually dawning that we have to wipe out a lot of bad debt. With platinum coins or bankruptcy or fraud prosecutions — it doesn’t matter. But, it does mean accepting “collapse” at the top, and the system that makes those pathogens, the top.

    2. Brooklin Bridge

      I think you are on to something (if I understand you correctly) in that many people – all of us really to one extent or another – simply are unable to face just how serious and hope-less the situation actually is. Note, I admire people who can remain optimistic including people who insist we should discipline ourselves to remain so, but not people who insist or imply we should ignore reality to do so. Many people I meet with excellent intentions simply refuse to acknowledge the suffering that already exists in this country alone. And when confronted with it, they take refuge in the idea that it is more or less inevitable under current conditions (usually meaning with those bad scary Republicans). These people may not admit it, but they are really very dependent on living apart and insulated both physically and intellectually from the suffering.

      1. Massinissa

        “And when confronted with it, they take refuge in the idea that it is more or less inevitable under current conditions (usually meaning with those bad scary Republicans)”

        Or, on the other side of the spectrum, those evil communist-socialist-muslim-whatever liberals.

        To most Americans, the problems with America are the fault of the “other” party. Their own party is completely righteous and infallible, with the possible exception of party members who are too much like the “other” guys.

        The “othering” of one half of America to the other half has been incredibly successful. But then again this experiment has been going on for what, a century?

        1. Brooklin Bridge

          Agreed. Tribalism is a huge problem and you are right to point out both sides.

          But currently, the way the stage props have been passed out, the Rethuglicans have agreed to wear the scary pirates costumes and the Vichy Democrats the slick business suits. I didn’t make that up regardless of which way my own tribal inclinations would point me in this fog.

        2. tracy coyle

          I have to say that a significant number on my side (my tribe) – conservative/classical liberals – see the damage caused by liberalism AND social conservatism AND Democrats AND Republicans AND 1%ers AND economic parasites (I mean those that abuse social welfare systems) AND media-induced-mindnumb middle class AND 2nd tier beneficiaries of the Elite.

          There is a significant chunk of ‘tea party’ people that see the political class (Left, Right, ‘Independent’) that support the Financial Class that are doing a fine job of sucking life out of the economy.

          Yea, I found points in common with OWS – but it was their observations I agreed with, not the solutions, which were overwhelmingly ‘more government control’.

          Forgive all student debt, ARBITRARILY reduce all mortgages under $400k by 1/2, eliminate 30% of federal gov spending and eliminate ALL federal taxation for 1 year. Raise interest rates to 4%. It would decimate the 1% class/financial class, stimulate the economy.

          1. LifelongLib

            What entity other than the federal government is going to force the wealthy and their minions to forgive student debt and cut mortgages in half? Whose 30% of federal spending are you going to cut? If federal taxation is eliminated, will the federal government deficit spend to make up the difference, or will even more regressive taxation be imposed by state/local governments?

            As usual, the conservative/Tea Party solution is no solution.

          2. Massinissa

            I have to agree with the lib here.

            How do you erase student debt WITHOUT using government? That sounds like “big government” forcing its hand into the economy to me.

            Unless there are certain types of big government intervention in the economy that are ok and types that are not ok. If so, could you point out the difference? Maybe then your stance will appear less seemingly contradictory.

          3. tracy coyle

            I actually specified what to cut in the federal government – click on my name to be taken to the site of my FY2014 Federal Budget Proposal.

            Second, reducing the fed gov by 30% brings it closer to the current revenue so the amount of gov deficit spending would substantially decrease – yes, it would increase for the one year until the reductions take effect. However, the $2t in taxation that would remain with consumers and business would likely add to state tax revenues.

            Third, most of the student debt is held now by the gov as is most of the mortgage debt through the Fannie/Freddie/Sallie organizations.

          4. LifelongLib

            Glancing over your proposal we probably disagree on 90%… the federal government should pay for ALL basic health care and retirement as human rights, funded by either deficit spending or a progressive income/wealth tax. Your balanced budget and flat-rate tax suck money from the private economy and fall more heavily on the poor than the rich. The private health insurance plans/401K’s make people even more dependent on the vagaries of the market than they are now.

            I don’t expect to persuade you of this (nor should you expect to persuade me) so best we agree to disagree.

          5. LifelongLib

            Forgot education — free at public schools/universities from pre-K to graduate school.

            Another thing we don’t agree on.

          6. banger


            You can just forgive student loans by passing a law that forgives the debt no enforcement mechanism is required. As for the rest of it, I don’t have any answers but whatever those answers will be, we have to understand how the federal government works, how laws are made and how regulations and laws are enforced. Once that happens I think we would probably all agree that the federal government has passed the tipping point. While once it was a net-positive for society it has now well passed the tipping points wherein it encourages and rewards activities that are against the best interests of society in general. The left should join elements of the right that are anti-government and ask, in exchange, for them to realize that most of the large corporations in all sectors seek to rig markets often through government regulations and favorable treatment from government. The more powerful you are the more the feds will defer to you just as cops in many areas leave the big-time dealers alone and only bust small-fry (often in partnership with the big drug dealers).

            In short, our government is hopelessly corrupt and I cannot envision a way that government can be reformed. For me the tipping point was the election of Obama–he could have moved the government into a force for progressive change. Obama had public support to reform the finance sector as well as health-care (I don’t consider Obamacare a step in the right direction) and many other areas. Instead he chose to further entrench the status quo. I think the message the bureaucracy received is that the election was all talk and no walk and they turned out to be right. So it was business as usual in Washington with Obama–money talks and bullsh!t walks.

            We should remove our support for the feds–wish it were different but it’s hopeless.

          7. LifelongLib

            I want a federal government that fairly represents the interests of all Americans, and (as the Constitution says) promotes our general welfare. That requires a government that in some ways is more powerful than the one we have now, or at the very least exercises its powers far differently than our current government does.

            If that is not possible than it’s much more than a failure of government. It’s a failure of democracy. Giving up on the federal government is admitting that democracy in the U.S. can’t work. The things that need doing in the U.S. can’t be done by small (even state-government-sized) entities. The federal government is the only agency with the money, legal authority, and organization to provide the national solutions we need. We can’t afford to write it off. We must take it back.

          8. Massinissa

            No offense Lib, but I agree with Banger here. The Federal government is entirely compromised.

            Theoretically, big government doesnt have to be bad. But this government does not belong to us, it belongs to the capitalist class.

            And voting has proven to be ENTIRELY ineffective. We are not even allowed to vote for anyone who offers real change, except for third party candidates, and even though I voted Green last election, they dont have a goddamn chance in hell of ever winning.

            It might be high time to try and think of non-governmental solutions at this point, because theres nothing we can do to take over the government at this point short of a coup. And the progressives are the last group in this country that would think of something like that.

          9. Brooklin Bridge

            Theoretically, big government doesnt have to be bad. But this government does not belong to us, it belongs to the capitalist class.

            Exactly. Dead on. But while that may be acknowledged in somewhat different ways by both the left and the right, that in itself, is insufficient to form a constructive coalition without some other intervention such as a considerable time lapse, perhaps a generation, allowing the dogma and propaganda of left and right to cool down and reform along lines of a more shared experience/perspective. Personally, I would hate a military coup. I loath the idea. But perhaps that extreme and the time it would take to “work through it” or gather the force to dismantle it is what it would take for the left and right to coalesce in more than simply tearing corrupt governments apart. So in that sense, possibly doing the one thing both ideological extremes can agree upon – tearing it all down – and getting a military junta in its place (regardless of what either side wants) would be the required pre-cursor to an eventual re-building of an actual democracy or perhaps some new social model.

          10. tracy coyle

            To Lifelonglib: there is no authority for the government to PROVIDE individual support, be it health care, food, housing or education. Promotion of the general welfare is not provision. But even if it were, creating that dependency upon government REQUIRES giving up any sense of liberty we might have. Once you give government the authority to teach children, you give up the right to determine WHAT they are taught (or fed, or how housed, or the nature of health care).

            We won’t convince the other because you want government to have the power that I can’t afford to give it. There is not enough money in the 1% to provide what you want to ‘give’ away to everyone. 100% taxation of the 1% isn’t enough to provide for a year of what we are spending NOW let alone anything more.

            As to democracy – mob rule has always been direct path to tyranny. People will vote themselves the fruits of other’s labors – that is what you demand, that people forfeit their fruits to those that don’t have them. It isn’t compassion to take from others to give to someone else.

      2. Lambert Strether Post author

        This makes me think of the “First World Problem” trope–

        “OMG, that Starbucks server keeps giving me whole instead of skim!”

        “First world problem.”

        * * *

        Except we might reformulate to “20% problem” (student debt too high) vs. “80% problem” (no money from the third week in the month onward) vs. “1% problem” (“how can I invest if the markets aren’t transparent”) vs. “0.1% problem” (“the Manhattan penthouse with guards, or the entire Caribbean island with private Navy?”).

        * * *

        For example, it couldn’t be more clear that over 20 million people in the labor force were put on an ice floe and shoved out to sea. That’s an 80% problem.

        It hasn’t been 20% problem as such, even if more humane factions in academe (MMT’s Jobs Guarantee) and the commentartiat have been pushing the issue, and are finally getting a little traction. However, the ice floe is quite far out to sea, now.

        1. anon y'mouse

          it isn’t always the case, but a whole heckuva lot of students live more like your 80% during (and perhaps even after) their school years than you might like to think. the loans pay for school and the occasional extras, but I don’t see a lot of high-hog living going on. then they face the same uncertain job market of the 80% with a debt slaver lashing their behinds.

          so, yeah. while they are privileged enough to even be ‘going’ to school for a better chance in the big rigged casino economy, they face all of the same problems. just think of it as student loans in lieu of mortgage one is in constant danger of defaulting on. one makes you homeless immediately, and the other can be docked from your social security (if it is still there) in your old age.

          your attempts to divide the more from less needy are not really necessary. we’ll all get there in the end.

      3. Moneta

        IMO, that is why we are not figthing off the 1%ers. A large percentage has no clue and thinks this is just a weird recession and others refuse to face the truth.

      4. Bruce Wilder

        Brooklin Bridge: “many people – all of us really to one extent or another – simply are unable to face just how serious and hope-less the situation actually is.”

        That’s an aspect of the point I’m fumbling toward.

        We are in a fog, as someone said. No where do I feel it more than when I observe a conversation between a disillusioned but sincere liberal and a sincere Tea Partier. Both feel despair at the decline of the country. Neither is doing the tribal thing of blaming the other party — “poor Obama cannot do a thing, because the Repugs won’t let him”. But, the POVs are so disparate that agreeing on action seems impossible.

        So, the fog is part of it.

        And, lots of us are immediately dependent on the very economic structures that are sucking the life blood out of the country. Sure, health care is a mess, and extremely costly, but health care is one of the few growing sectors with good paying jobs for what used to be called blue collar workers. The military-industrial complex is a parasite on the body politic — the President is talking about spending 3 times the GDP of Afganistan on the War in Afganistan, now in its 11th (?) year! But, again, a lot people find careers and economic support and a sense of personal pride and accomplishment in that parasite. The oil industry is a huge power, even if it preparing the planet for ecological collapse. The financial sector at least three or four times the size it would be, if it were efficient, but that’s also a lot of jobs and family income, and not just among the 1/10th of 1% or even 1%.

        We’re hungry and our most nutritious food is poisoning us, and somehow we have to find enough collective enlightenment, to turn and walk away, to sacrifice in the here and now, for the promise of a future. We have to fast now.

        And, historically, it doesn’t usually work out well in these situations. The best you can hope for is a kind of accidental deus ex machine in the form of a system collapse. The financial sector, say, simply, fails catastrophically, and we don’t have to face the choice to walk away — it’s already gone, and we just have to pull together to make do.

        Instead, we, or our leaders chose preservationism, making it that much harder to do the right thing, because any proposal for reform has to make it past people with a well-financed interest in their now preserved bird-in-the-hand. And, while we wait for reform, the preserved financial sector is poisoning us, weakening us.

        Repeat the same formula for petroleum-oriented energy sector, or the health care sector. Or the whole suburban-complex we love so well, but which is not configured to survive the future in front of us, in which there is not enough energy to run it.

        1. Bruce Wilder

          Here I am replying to myself again — what an idiot am I?

          But, I see Krugman is criticizing the liquidationist impulse.

          And, that makes my point rather well. The liquidationist impulse, on some intuitive level, is correct, and Krugman — though definitely a good guy from my personal political POV — just doesn’t get it. For Krugman, the primary problem is “cyclical, not structural”. But, it is structural, and the structure has to be demolished. People can understand that instinctively, but not analytically to the satisfaction of a Krugman.

          And, that’s how the fog swirls.

    3. Massinissa

      Europe? Recover?

      Im not convinced at this point Europe will EVER recover… Im not convinced we will either, mind you.

  17. Duncan Hare

    This is at the core of MMT:

    Government debt is absolutely necessary if you are in the situation where you are in the United States and elsewhere where the private households are, per balance, still savers, net savers, where the government should not go into debt anymore, but where the company sector is a big saver, a net saver. So how can you have all the sectors saving? It’s impossible. It’s absolutely impossible. But it’s not allowed to talk about it. Nobody wants to talk about it, that not all sectors can be net savers.

    Missing is the class discussion: The 1% Can be net savers if the 99% are paying rents and falling into debt servitude.

  18. scraping_by

    [The eternal question: Are the elites stupid and/or evil? –lambert]

    The eternal answer – those aren’t mutually exclusive.

    Indeed, the more mathematically inclined among us could work up Venn diagrams with two variables, a function between stupid and evil. Very few 100% stupid. Very few 100% evil.

    Or perhaps they’re additive. Stupid people with evil motives, and/or evil people who do stupid things. You’d need an objective scale that measures both stupid and evil on an equivalent basis so you could total the stupid/evil content.

    Or, if your taste is higher math, you’d derive the change in stupidity as evil consequences took over, leading to stupid arguments to justify evil actions. The total stupid/evil could be integrated in two variables.

    Given the mainstream economics custom of trying to reduce reality to higher math, I’m surprised there isn’t much more work done in this fertile field.

    1. banger

      On motivation: people fall into these strange practices. Ruling class types don’t start of as strictly evil but, eventually, fall into it. Since our social values say that to be wealthy is to be virtuous then….why not be evil if you’re rich?

      1. psychohistorian

        So why as a group are we not focused on changing the rules of inheritance that lets the social perverts accumulate enough money, property, power, etc. to create the class system we have had for centuries ????

        ….truly laughable if you think about it. We should laugh this sick social organization and those that perpetuate it out of control of most of the world countries’.

        In Inheritance We Trust doesn’t work for me any better than the Gawd version but both influences are greater in our world than they should be, IMO.

        While the elite think that the way to flatten the Org chart of the world is to commit genocide on the worlds poor, maybe permanently eliminating the possibility of a 1 percent is a better idea.

  19. Mbuna

    Is there a way forward here? Readers?

    No way forward at the moment. The paradigm has shifted. Have a look at this as it gives us a few clues ttp://
    We can conclude, in general, that this class of people are more greedy than smart and to me that means that things are going to spiral out of their control. This will present an opportunity for change so a way forward is possible then but not before then. I say we will have to wait 2-3 years for that opportunity and I pray that the human psyche of that moment will be ready to take a step forward. If not, look out below!

    1. banger

      Yes, more greedy than smart–but it depends of what you call “smart.” Really this class of people is just following, as best as they can, the cultural script aren’t they? Don’t we believe in common that wealth equals virtue? Isn’t that what we actually honor? Inn’t that what society rewards?

      Aristotle equates fame with virtue. In other words, fame comes from fully personifying the social mores of society and that’s what the rich do.

      1. LifelongLib

        Equating wealth to virtue is rich man’s BS. The people I grew up among believed in doing the things that needed doing, whether or not it made you wealthy/happy. I can’t say I’ve lived up to that ideal but it did exist.

    2. Moneta

      From 2003 and 2005, I’d come back to Canda form NYC and report on your bubble and I would get laughed out of the boardroom.

      Most have not clue.

  20. F. Beard

    You Progressives are a trip:

    You agree with a money system that allows the banks and the so-called “creditworthy” to steal the purchasing power of everyone else and then whine about “Greed” when they do so!

    “You can’t cheat an honest man?” Then look in the mirror to see the problem.

    1. LifelongLib

      Honest men get cheated all the time, not because they’re greedy but because they’re too trusting.

  21. CapVandal

    “Government debt is absolutely necessary if you are in the situation where you are in the United States and elsewhere where the private households are, per balance, still savers, net savers, where the government should not go into debt anymore, but where the company sector is a big saver, a net saver. So how can you have all the sectors saving? It’s impossible. It’s absolutely impossible. But it’s not allowed to talk about it.”

    Paul Krugman talkes about it every week (if not every day).

    It’s obvious that we need more fiscal stimulus. I talk about it all the time.

    And, this fact used to be heavily emphasized in the Econ 101 text – Samuelson – until it was taken out a few editions ago. Specifically, ‘The fallacy of Composition’ illustrated by ‘The Paradox of Thrift’ was prominent in the introduction.

    Basically, everyone that had personal experience with a deflationary spiral is now dead.

    1. Don Levit

      Why must the government provide the fiscal stimulus?
      Why can’t it be provided by the net savers – the corporate sector and the household sector?
      When corporations and households invest their surplus, the hope is to provide a positive, productive return.
      When the government invests its surplus – I take that back, there is no governmental surplus to invest.
      Don Levit

      1. banger

        But the government could invest in clearly positive investments if it offered interest free loans or selected grants to fund education or promising technologies. The GI Bill was a great investment.

        However, I see no likelihood of anything like that happening. Private money wants to either speculate or buy luxury and/or just safety, and government just wants to feed the corrupt system that is Washington whether it’s Cold War weapons systems or farm subsidies. We’ll just have to stumble through as we are and make the best of it and hope beautiful flowers grow between the cracks of the system.

      2. Nathanael

        Don: because, usually, only the government can successfully print large amounts of money and get people to take it.

        If you find someone else who can print money — and get it accepted by nearly everyone — that person can provide stimulus.

        It’s the money-printing power which is necessary to create stimulus.

        Yes, there are lots of conditions under which other people can print money. If they can get people to take it, they can provide stimulus.

        *This is what created the bubble economy of the Clinton/Bush years*. Phony “AAA money-market” stuff was treated… as money. This money juiced the economy. The *DEMONETIZATION* of these “AAA money-market securities” is what caused the economic crash.

      3. Calgacus

        Why must the government provide the fiscal stimulus? Why can’t it be provided by the net savers – the corporate sector and the household sector?

        To add to banger’s & Nathanael’s excellent answers, because “stimulus-providing” = deficit-spending = spending more money than is taken in. And this is logically contradictory to “net saving” = taking in more money than is spent. Flassbeck understands that what you ask for is logically impossible.

        When the government invests its surplus – I take that back, there is no governmental surplus to invest.

        The government cannot “have” a surplus or a deficit of its own money to “invest”. The government doesn’t have or not have its own money. The meaningful notion of a government surplus is an increased real wealth and product of the country. If you want to pick nits, minus the change in foreign debt, and to pick nits of nits, minus the distorting or inflationary effect of enlarging the stock of domestically held debt when the growth is brought about by new spending.

        What governments are doing right now is destroying their surplus, their productive capacity, their real wealth, by refusing to engage in the spending, the direction, that the economy, that real people are crying out for. The way to tell this is happening is when ONE person is involuntarily unemployed.

        Right now, due to the triumph of academic morons in the 60s-70s (following, returning to misguided thought even earlier) and the elite segment they mouthpiece, the foolish humans of Earth are destroying colossal planetary resources for no reason whatsoever, except for the amusement of these most depraved elites.

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