Martin Wolf on the Contained Depression

By Houses and Holes, editor of MacroBusiness and founding publisher and former editor-in-chief of The Diplomat magazine. Originally published at Macrobusiness.

Lambert here: Listen to this with your morning coffee. Two cups, it’s long but lively.

* * *

Find attached a recent speech by the FT’s Martin Wolf on the evolving context of the post-GFC world and the lessons we have and haven’t learned. Essential weekend viewing.

Macrobusiness commenter Gunnamatta helpfully provided a partial transcript of some real zingers. Here it is:

‘The financial sector in the modern western world does not lend for business – business lending is almost insignificant. Its principle job is to leverage up property assets – mostly household but also commercial property – and in the process generate, when you think about it, a massive rise in real prices of this stuff, and massive increases in household debt.’

‘At this point intelligent economists would say ‘This wouldn’t have happened if they had used their money wisely.’ This is perfectly true. But as I have already told you, they didn’t, they put it into housing. And housing is really not a very good asset to back foreign borrowing against, because it’s completely non-tradable unless you intend to sell all the houses to Chinese people.’

‘There is a simple solution for the US housing problem – allow a hundred million Chinese people to come to America and buy the houses. And since they paid for them anyway, why not?’

‘And what we had was a situation in which the emerging world as a whole became huge net creditors of the developed world. We borrowed all this money – and we threw it away. Very very simple. Colossal wastage of this capital. And now they want their money back. And the answer of course is that they will get it back, in depreciated dollars.’

‘My basic rule is when the government tells you there is nothing to worry about, the thing you do is you take your money out.’

‘The Eurozone was created and the net flows across the Eurozone just exploded. And Germany was the dominant creditor. It went actually from a small deficit to a gigantic surplus, it’s the second largest surplus country in the world, by the way. And then there are a few other surplus countries of which the most important is the Netherlands. And down below you get these absolutely enormous deficits, by far the most important was Spain. But a number of countries, Spain, Portugal, Greece are the most important were running current account deficits of 10% of GDP for roughly a decade, their net external positions went to about 110-120% of GDP and all this stuff was invested wisely and sensibly in in overpriced houses. It is not surprising that we ended up in a very very large mess.’

(of nations in Eurozone with net government debt of more than 100%) ‘And they are all going to default. We just don’t know when.’

‘In essence we have the same financial system as before, except that the banks are bigger and more concentrated, and more diverse, and they are very marginally less leveraged – but they are less leveraged, as I put it in one thing it is the difference between being unbelievably over-leveraged and merely being extraordinarily over-leveraged, so basically the leverage ratios have halved but they are still very very very high. The interconnections of the banking system are the same, and it is not at all clear that any of the underlying problems that have been revealed in risk management and so forth have been resolved.

The second think which I would like to link with this. The other thing we have learned definitively, absolutely definitively, that the dominant dogma of central banking, which was that ‘if we stabilise prices’ – this brings us all the way back to Wicksell and Hayek, it brings us back 100 years of debate – ‘if we stabilise prices, or price expectations, in this case inflation expectations, the economy would be stable and we could assume the financial sector wouldn’t cause us problems’ that proposition has also I think been definitively disproved. And for that reason central banks are engaged in a desperate attempt to put together a coherent doctrine of what it is they are about when they get back to normal, if they get back to normal. Remember Japan hasn’t got back to normal for twenty years’

‘Our views about the financial sector and our views about monetary policy were, in my view, simply demolished, and we don’t yet have a coherent and agreed alternative.’*

‘The third lesson I would draw, and it is controversial, but to a first approximation, a long period, to a first approximation, there are some exceptions, a very lengthy period of running very large current account deficits is likely to be a warning of a very significant financial macro crisis, unless ……….. the money is being invested. Because by definition some sector of the economy is a very large net borrower……..that the money is being invested in extremely valuable assets which have a particular property of being able to service foreign debt – they are tradables. And this is almost inconceivable because one of the consequences of a large current account deficit, a concomitant, is a huge appreciate of the real exchange rate, which has exactly the opposite effect. ’

‘On the other hand. If Canada and Australia managed to really succeed in screwing up where they are it will be impressive’


Supports MacroPrudential regulation

Winter is coming. Or not!

NOTE * So for macro, Wolf says we don’t even know what the alternatives are. Yet for the political class (and their owners) TINA rules. Seems contradictory!

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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. anonymous

    I started to watch Wolf on Bill Moyers this Friday. I stopped watching the interview once Wolf suggested Social Security cuts were needed as a long-term fiscal plan to cut the debt. This comment reminded me why I don’t read the Financial Times or any other similar magazines. I don’t like wasting time listening to “experts” who are wrong. “Experts” such as Wolf love to propose higher taxes on the middle class and on labor while somehow forgetting that all of the money right now is stuck at the top in the tax havens and offshore bank accounts of Wall Street banks and billionaires. For example, Wolf’s premise was that immediate cuts to Social Security should not be made through a default because doing so would plunge the country into an immediate recession. So wouldn’t austerity and changing Social Security’s COLA to chained CPI have the exact same recessionary effects in the future? Cutting Social Security would definitely cut into demand because seniors would less money to spend. What makes an immediate recession unacceptable but a persistent recession and high unemployment in the long-term acceptable? Hopefully, in the segments that I missed, Wolf suggested increasing the capital gains tax rate from the current rate of 15% to a much higher rate in order to once and for all raise taxes on Wall Street and on billionaires. However, for some reason, I would expect that he said nothing of the sort which would be no surprise to me.

    1. Lambert Strether Post author

      Well, when you’ve got the head editorial writer for the Financial Times saying that the central dogma of Central Banking has been definitely disproved, and that nobody has any alternative, that’s an important moment to recognize. I doubt very much I agree with any of his policy alternatives either; but in this talk he gave very little space to policy, including capital gains.

      Wolf’s hair is on fire! Even if only for “know your enemy” purposes, it’s important and useful to understand why.

      1. Banger

        I agree with you, Lambert, when someone like Wolf comes over to the ideas that have been central to what you all have been saying for years that’s a big f!cking deal and needs to be leveraged for all its worth.

        As for solutions to the problem those are less important than getting the ideas wolf has articulated onto the stage of the mainstream media–that’s the real trick. In fact, it is the mainstream media we need to lobby not the politicians.

        1. James Levy

          It would be great if it lasts, but I doubt it. Greenspan for about six months was saying similar things back in 2008, but he changed his story the second the crisis seemed to be defused (from the point of view of the banks, of course). You know, like when Greenspan said I thought you could trust people to look after their own best interests, but I was wrong. But then when it came time to regulate the banks because they could not be trusted to look after their own wellbeing, forget about the integrity of the system, he ran back to his old free market will solve everything bullshit.

          Men like this have been in the service of this system for so long that any threadbare excuse will be used to go back to preaching the same shibboleths, the same dogma. Right now, mommy has died and they suddenly doubt their beneficent god. But the first chance they get, they will be back in the pews, hailing that old time religion. The courage to face reality is not in them, and the incentives today to face reality don’t yet exist. When the power goes out and the supply chains buckle, then maybe they’ll look reality square in the face But they’ll likely turn to a Hitler or Mussolini first to delay the hour of reckoning just a bit longer.

          1. JustAnObserver

            James (& others):

            Although this is high profile & very public, esp. for an FT lead writer, Martin Wolf has been saying this stuff for several years now, since not long after the onset of the GFC, and with ever increasing intensity (and more and more hints of frustration). It worth putting that clothes-peg on your nose and digging into the back issues of the FT to read his stuff.

            For a long time I kind of considered him as a kind of short-form William Buiter … until the latter took the poisoned Rubin penny & (largely) disappeared from view.

          2. Banger

            Just a word on Greenspan–he thought that institutions were entities with a sense of integrity, i.e., they cared about their own survival as entities. No, that’s not true at all in the real world. They are entities that people inhabit to seize whatever power and money opportunities arise form their positions–they are not, at this point in history, interested in the well-being of their company. The notion that they are shows me that Greenspan is to be pitied. By all accounts he really believes in his own drivel as do many other people of his generation. He doesn’t get that we live in a world that is without honor.

            1. damian


              whether for Greenspan himself or the banking community – he never believed in integrity – its all a story to divert attention from his overwhelming fraud at the helm.

              it like saying rubin didn’t know derivatives were a neutron bomb in the wrong hands in excess when he bounced Born in 98′.

              all these guys are scammers

      2. susan the other

        I thought Wolf was a little thin on facts. Conveniently so. The biggest fact we are facing is that capitalism, as we have known it, will not work without affordable energy – so that’s the first thing he forgot to analyze. He then failed to account for all the financialization of everything human that isn’t nailed down; he was not disturbed by elite fraud, etc. He complained vacuously about the lack of investment but he did not approach the contradictions we face because growth no longer allows the old models to work. He seemed a little too austerian in attitude to be tisk-tisking the EZ as hopelessly lost. Etc. I think he is just another obfuscator. When he confessed that altho central banks are seeking a coherent doctrine, they can’t seem to find one it was too calm a diagnosis, as though he thought he might offer them a flashlight.

        1. Banger

          I think it’s a mistake to demonize someone like Wolf or others who don’t share our POV. We gain by listening compassionately and taking the good of what someone is saying or doing and keeping our attention on that and not being so quick to judge. The left ought to be about compassion and connection and not about alienating others. When Wolf is with us we praise him–where he is not we critique him. My guess, from knowing other people in high positions with good and honest hearts, is that he really believes in capitalism and believes it is a wide enough ideological “venue” to hold greater possibilities. Let’s not automatically dismiss that or any other possibility. I personally, believe capitalism is essentially against social morality and we need to move beyond it.

          1. John Mc

            Agree with you in spirit Banger. I think we should be open, humble and curious. However, there is a point to be made about a more “radical” approach to what is not working.

            In a common dreams article today, Chris Hedges calls for a more certain radical response. One supposes that this might foment a more transparent grouping of voices between:

            1) The TINAs
            2) Their apologists and functionary economists
            3) The undecided professional class
            a) Should I stay (individualists and indebted)
            b) Should I go (disenfranchised and idealists)
            4) The radical objectionaries

            This begs the question, is a compassionate response one of dynamic and radical resistance? Or is it listening to all sides while delay tactics, covert processes subsume more of our democracy?

            1. Banger

              In the more esoteric forms of martial arts it is essential to get into the mind of your opponent through opening the heart. Many people believe that to oppose someone you steel your heart to them and treat them as you would an object to defeat.

              Jesus said “love your enemies” but he knew that we would have them and the “love” meant full acceptance which includes the need to oppose them.

              We need a radical response to the situation we face but we have not had one because we have not been able to organize a community of interest. I’ve tried and no one is interested why that is should be a topic we ought to talk about.

              1. John Mc


                Thoughtful and measured response.

                One wonders if the reasons why this community of interests struggles to form is due to the ideas that:

                1) The public does not know the wealthy very well (enough to really know their objectives).

                2) The radicals do not have enough voices who can effectively translate this message (presuming these voices are not masking neoliberal positions)

                3) Our solutions do not offer immediate gratification (often times more pain). And we have been trained by our consumer culture that wants=needs. Gotta have it now culture is not fed and we struggle with message when it comes to shared sacrifice and delayed gratification – markers of maturity. Real change takes time.

                4) Trust Erosion – leads to either a cynical individualistic “I’m going to get mine” or an isolated learned helplessness.

                I think “belonging” to a thoughtful group of peers can address deficits of elite knowledge, grow and merge divergent voices, crystalize short-term benefits of resistance, and innoculate the fall-back measures of living without trust. In fact, it is this type of group that is most capable of changing culture. I forget the author who said it, but it is the only thing that has even done it successfully.


                1. Robert Frances

                  I call it the Tower of Babel challenge. There are thousands of people with ideas about what should be done to counter the economic dislocations occuring around the world, but getting more than a few people to agree about what is needed to be done about it is almost impossible.

                  For me as a tax accountant the answer is fairly easy: mandate job sharing at the largest employers so unemployment is completely eliminated and repeal regressive taxes such as sales and payroll taxes, which would give the lower income groups much more disposible income. Substitute the tax revenue with a modest tax on the very wealthy, and much higher graduated tax rates on capital gains and on large passive incomes such as rents, interest and dividends, and repeal the multi-billion dollar tax subsidies given to large landlords and to companies that ship jobs overseas to reduce their business taxes. Also repeal corporate profit taxes and substitute them with gross receipts taxes that would shift taxes to the largest companies (who can currently easily plan around (evade) profits taxes) and would tax the sales of companies that ship jobs overseas yet sell into the lucrative US market. A modest 5%-10% minimum tax on wealth greater than $10 million, offset by any income taxes paid, would capture some tax revenue as well.

                  A small group of us working with about 200 other people were trying to find a common economic platform but there was very little support for these specific tax ideas. Some people in the group were small landlords and were afraid of losing their tax subsidies. Some were small businesses who didn’t like a gross receipts tax even though we were proposing it only for companies with over $1 million of sales with graduated tax rates (1-2%) above that sales threshold that would barely affect businesses between $1-5 million of sales, but would go up to 10% for billion-dollar companies. Some were adamant that corporate profit taxes should be increased, not eliminated, no matter how hard we tried to convince them that higher corporate taxes only leads to more artful tax evasion techniques and the off-shoring of profits and labor.

                  In short, trying to get a group of people to agree about what to do next appears to be why the status quo continues unabated.

                  1. John Mc

                    I appreciate your response and agree this is a difficult task to get people on the same page. Usually, this is why American politicians have an advantage (as they use symbols and big ideas from Edward Bernays) to capture the imagination of the public. While level-headed, practical ideas like the ones you suggested get lost in the minutia. The problem is that there is such a small percentage of Americans who can relate to many tax law changes —- and the pols play this up with complex 900 page bills full of loopholes and legalese.

                    We need a simple narrative and messengers willing to take a single topic and drone it into America’s psyche (as forgetting is our biggest foible, next to arrogant exceptionalism).

              2. The Black Swan

                This is going to be a rough paraphrase, but MLK said something along the lines of “I don’t have to like you, but I have to love you”. Love being the universal love that drives the world, the love of compassion and brotherhood.

                Our ‘enemies’ are really the most ignorant, miserable and deluded people in our society. They need our help, not our antipathy.
                In order to harm another, first one must harm oneself. Imagine the harm you have to cause in order to defraud, kill, torture, etc.

      3. Paul Tioxon

        Martin can clearly see the system has terminal problems. It does not mean he thought the system was wrong when it was making him a media career. But when the system that made him affluent blew up in his face, he seems to overall, report that it blew up in everyone else’s face as well. That is a very big problem for him and people in denial.

        He can also see a lot of people who are in authoritative positions public and private are NOT necessarily coming to grips with the explosion and that bigger explosions are coming. Like clock work. A lot people, with power, do know this, and also do not know what to do.

        That does not mean they are not going to come up with what they can agree are some kind of stopgap procedures like reducing Social Security and Medicare. Some want to wipe it out completely, some want to bleed it as much as they can before it stops serving as the safety valve from violent revolutionary activity, some want to make token changes to keep the allegiance of those who depend upon it, and may not notice the actuarial tweeking that seriously erodes benefits, but still keeps it looking basically okay. And some want to expand and strengthen it, also as a bulwark against revolutionary activity and to co-opt constituents who will turn like an angry mob against those, I’m talking to you Ted C.& Tea P., who will murder the programs that sustain them in the remaining years of their life.

        Watching some TV, some news programs, some websites, like National REview Online or Freedomworks, allows you to figure out what does not make any sense at all when you read about events in media outlets. Martin and MOyer are upset the system that they worked in so long is falling apart. I would be too. Who wants to see a lifetime of work be for nothing? Their confusion is shared by plenty of people who completely disagree with them and are also at odds with their new prescriptions. We are forewarned, but not forearmed. Good policy decisions will be harder and harder to come. If they ever come at all in the necessary scale commensurate with the size of the problems we face.

  2. vlade

    So, we get money (say borrow) from EM, and put it into housing, and it’s bad (ok, I agree).
    But Canada and Oz does the same (well, it doesn’t borrow, it digs and ships, but IMO it’s actually worse as you are moving real wealth not a promise you can default on), but they are ok? A bit of inconsistency I’d like to see explained from Mr. Wolf

    To give Wolf his due, he has been moving towards more sensible options (as he saw that the classics were more and more unworkable) during the time, but it’s taking quite a long time.

    I still find it amusing that the newspaper with the most sensible economic commentators (AEP and to an extent JW) is Daily Telegraph. Despite both of them being fairly right of the centre, they well recognize that forced austerity is dumb and making it only worse, and that like it or not deficits are going to go up unless we want a proper Great Depression re-run (with soup queues and all)

  3. s spade

    Wolf sounds very smart but seems dedicated to rearranging the Titanic deck chairs. The American problem is quite simple: unserviceable debt at the bottom, bankers dedicated to gambling knowing that their losses will be covered and their ‘profits’ siphoned off by executive theft, middle class wealth destroyed by ZIRP and inflation disguised by phony statistics, job destruction and wage deflation engineered by monopolistic corporations dedicated to executive theft, a political class dominated by opportunistic scoundrels dedicated to personal aggrandizement and retirement on the corporate dole, a population devoted to cheap entertainment, tawdry accumulation, and sexual adventuring, all of it proceeding as if the environment imposed no restraints.

    Wolf seems to feel that enlightened central banking ought to cure all this. In the Eighteenth Century he would have expected Necker to save France for Louis XVI.

    Change is surely coming. When, nobody knows. I give the whole thing another twenty years, but I have always been an optimist.

    1. taunger

      Hey! I’m currently a big fan of cheap entertainment and sexual adventuring! Any way we can keep those in the next socio-economic iteration we see?

        1. Roland

          I often enjoyed reading eXile.

          Nevertheless I think s spade’s summary was pretty much on point.

          I’m a socialist, but I still understand that I lot of things I like about a liberal capitalist society will be gone, or be greatly reduced, when liberal capitalism gets superseded.

          While I have indulged in some luxury, sloth, profligacy and decadence, I’d chuck the lot of it tomorrow if there was a fair prospect of obtaining social equality.

          Levelling comes with a high price. It looks more and more affordable each year.

  4. Aussie F

    What’s coming is fascism. It’s what elites do when they run out of options.
    It shouldn’t be difficult to implement. Class consciousness has vanished – apparently a white skin and unpayable college debt now makes you ‘middle class.’

    Oliver Cromwell’s response to political crisis just about says it all:

    Calamy:’But there will be nine in ten against you.”
    Cromwell: ‘But what if I should disarm the nine and put the sword in the tenth man’s hand. Would that no do the business?’

    1. Banger

      Not in the USA. This country is deeply divided and to have a good fascism you need some kind of cultural unity and we don’t really have that here. More likely we would have some level of civil war and various feudal arrangements. The fact people are heavily armed in this country, particularly in the South where I live would not make a central authoritarian regime very tolerable unless it brought stunning economic benefits–which it can’t. Besides, Americans are in no mood for a strong central government–most of us believe, rightly, that national politicians are all either cretins or thieves.

      1. James Levy

        You may be right, but if a military junta took over the government I am not sure it wouldn’t be able to hold the South and appease the gun nuts and cow the rest. The media is endlessly pro-military, to the point where it simply cannot be criticized in the main stream media, and the way that war criminals have either been let off, excused, or given derisorily lenient sentences tells us a lot.

        My takeaway from Iraq and Afghanistan is that the military brass no longer has the guts to enforce discipline and military law. Turn these clowns loose along with the militarized major police forces on the citizenry and resistance would collapse in short order. Daily shots of “the troops” (whom we MUST support) besides piles of bodies identified as “domestic terrorists” on every news broadcast and on the entry page to and youtube would do the trick in two or three weeks.

        1. Banger

          Well, I think you make the only possible argument for authoritarian rule. Americans of all political stripes and social classes love the military because they believe it is the only institution that nurtures virtue. And yes, if the military decided to install the whole laundry list of white Southern values I suppose they would have a lot of support in my region but I think that support would be short-lived as the reality set in unless, as I said, they were able to actually make the trains run on time so to speak–and that, knowing the U.S. military would be very unlikely.

          Most of our love of the military is based on movies and TV not reality. That effect would quickly wear off.

          And what of the rest of the country? If you alienated the cultural left, mainly the people like Snowden who populate the technocratic class the result would be sabotage–they may not be armed with automatic weapons but they are armed with the ability to destroy IT systems without which nothing can be run particularly the military. Also, please understand that the military itself is very divided and have different cultures. The Army, for example, have a dramatically different culture from the Air Force and they would clash. Colorado Springs and West Point are even further away culturally than they are geographically.

      2. Yves Smith

        People in gun-owning states harbor big-time fantasies.

        First, Google Tueller rule. Guns have been found to be generally useless within 21 feet of an assailant. Cops (cops, who are professionals!) can’t get a holstered weapon out fast enough to shoot before a bad guy can get to them.

        And you think cops can’t wear down someone with guns? Any one person will have only so much ammo. And witness that rogue cop in LA. They corned him and torched his house.

        And those guns are useless against sound weapons or helicopter gunships, or tanks, or cops wearing body armor. Local police are moving to military hardware. People with guns don’t stand a chance.

        1. James Levy

          As a military historian, I agree with you completely. But the fantasy of personal independence and republican citizenship through gun ownership is so strong that no amount of logic can or will penetrate it. When government seemed to slip out of the hands of white men, when women and blacks were no longer publically deemed inferior and were bound on threat of violence to obey, the gun became the last refuge of a certain kind of twisted psychic empowerment. In a sick variant of Jesse Jackson’s old mantra, it says to its owner, “I am somebody!” The fantasy is that when the day of the gun arrives, it will bring back the old hierarchies and certainties of a disappearing order. Real men will be real men again and the faggots and feminists better watch out. It’s a scary dream for us, but a compelling one for millions out there.

          1. Banger

            James–certainly any individual or even small community could not hold back the U.S. military and paramilitary police. But I can assure you that if it comes to that millions of men with military grade armaments including some heavy weapons owned illegally will make life very miserable for any occupying force and the U.S. security state.

            Look at the problems the military had with fighters in Iraq and Afghanistan. Hang out at a shooting range down here in the South and tell them they have no chance–see what kind of response you’ll get. There are just too many to just go in and take out.

            1. skippy

              @Banger… who says they have to go in.

              skippy… the arsenal is quite capable of more than arms length solutions, stand off is huge and quite accurate these days.

            2. Synoia

              Facing the military is stupid. Insurgency is the way to fight an overwhelmining military.

              Did you understand nothing of Iraq and Afghanistan and the countless otehr “asymetrical wars”?

            3. Yves Smith

              Bone up on drones.

              They are working on insect sized drones that kill by blowing up right next to the target’s head.

              And all those guys who like to talk up their gun prowess are mainly weekend target range shooters. Hardly any are hunters, and hunters sit quietly and watch for prey. No comparison to short range, hand to hand, or trying to get off a shot when you are anything but stationary. Even cops, who train and have experience, hit only 10-15% of the time. You are seriously going to tell me amateurs have a chance? You have been listening to way too much romantic fantasy. It’s a white man’s version of this clip:


              1. porge

                Guerrilla warfare has always worked in the past. Why do you think that it won’t work for a completely armed population that is spread out over a enormous geographical area?
                How many “bug drones” can you deploy?
                Are you going to carpet bomb the entire country?
                The best way to control a revolt in the US is to cut off food and water region by region.

        2. Banger

          Well of course the cops against one man or woman will win the day with overwhelming force but against thousands or millions? I could probably mobilize dozens of men within a day who have huge stocks of ammunition and fairly sophisticated weapons legal and illegal here in North Carolina.

          The cops are fine when they fight people they think are weird or of the wrong color but when it comes to neighbors–don’t be so sure they’ll follow orders and the state is unlikely to want to test that. One massacre will mobilize millions of people who will forge ad hoc militias–remember there are more ex-military people than military personnel.

          1. Yves Smith

            You and your friends are deluded.

            Helicopter gunships.


            Sonic weapons.

            Tear gas and worse.

            Your buddies will be over pronto. TPTB can fly OVER you and drop all sorts of shit on you. See how far your shots go when gravity works against you. And what they drop just depends on whether they want you cowed or dead. That’s much easier in rural areas with isolated building than in cities in the Middle East.

            The constraint is the bad PR, it’s not the ability to crush rebellions.

        3. coboarts

          I remember when Ariel Sharon ran the Palestinians out of Lebanon, they were allowed to keep their personal weapons (generally ak47s) – no real threat to the military. I reflect on that when I hear the argument that the second amendment right to bear arms is so that Americans can protect themselves from a government run amok. Better chance still the ballot.

      3. s spade

        They will just hire the gun nuts and blame everything on Communists. You guys will be afraid to open your mouths. We already had this movie in 1946-1955.

      4. JTFaraday

        “to have a good fascism you need some kind of cultural unity and we don’t really have that here”

        Oh, yes we do. It’s a whole fikken’ country full of plantation overseers. Generously, about every tenth person is a little more live and let live.

        Also, you’re contradicting yourself again, below at 11:38am where you say:

        “Americans of all political stripes and social classes love the military because they believe it is the only institution that nurtures virtue.”

        I’m sure people can come up with lots of references on the pervasive belief in the cleansing power of violence in conservatism. I’ll just pull the modern locus classicus:

        Also, with reference to this:

        “people are heavily armed in this country, particularly in the South where I live would not make a central authoritarian regime very tolerable unless it brought stunning economic benefits–which it can’t.”

        You must have come in after the debates right here about how “the Nazi Party at least had MMT and a job guarantee.” I must say this “jobs uber alles” mentality really gave me pause.

        Also, suppose Fascism gave people an excuse to do things they might be harboring some sort of desire to do in the first place, in order to pack that kind of heat.

        republicanism(!), my @ss.

        In any case, we don’t even quite need to go there because we already have the largest prison population on the planet, and its being put to labor already.

        It’s all perfectly normal.

  5. Schofield

    Martin Wolf has been reading Michael Hudson’s “The Bubble and Beyond” and as Mr Hudson tells us in his book human beings have had a persistent inability since we left the hunter-gatherer stage to work out the macro-economic and socio-political consequences from debt for their societies.

    1. John Mc

      And then there is this lengthy quote referenced in Ellen Brown’s work Web of Debt:

      Congressman Charles A. Lindbergh, Sr. revealed the Bankers Manifesto of 1892 to the U.S. Congress somewhere between 1907 and 1917. BANKERS MANIFESTO:

      “We (the bankers) must proceed with caution and guard every move made, for the lower order of people are already showing signs of restless commotion. Prudence will therefore show a policy of apparently yielding to the popular will until our plans are so far consummated that we can declare our designs without fear of any organized resistance.

      Organizations in the United States should be carefully watched by our trusted men, and we must take immediate steps to control these organizations in our
      interest or disrupt them. At the coming Omaha convention to be held July 4, 1892, our men must attend and direct its movement or else there will be set on foot such antagonism to our designs as may require force to overcome. This at the present time would be premature. We are not yet ready for such a crisis.

      Capital must protect itself in every possible manner through combination (conspiracy) and legislation. The courts must be called to our aid, debts must be collected, bonds and mortgages foreclosed as rapidly as possible. When, through the process of law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of the government applied to a central power of imperial wealth under the control of the leading financiers. People without
      homes will not quarrel with their leaders.

      History repeats itself in regular cycles. This truth is well known among our principal men who are engaged in forming an imperialism of the world. While they are doing this, the people must be kept in a state of political antagonism. The question of tariff reform must be
      urged through the organization known as the Democratic Party, and the question of protection with the
      reciprocity must be forced to view through the Republican Party. By thus dividing voters, we can get them to expend their energies in fighting over questions of no importance to us, except as teachers to the common herd. Thus, by discrete actions, we can secure all that has been so generously planned and successfully accomplished.”

      1. s spade

        And Congress delivered the Federal Reserve Act and the Income Tax. That sure put those bankers in their place!

  6. Norbert M. Salamoon

    While I enjoyed Mr. Wolf’s exposure of the financial issues of the past 7 years.

    However, I find it inexcusable that Mr. Wolf completely neglected

    1., the effect of ever rising real price of oil [especially for UK, a long time exporter of cheap oil, now an importer of VERY EXPENSIVE oil,

    2., and the effect of the distortion of US unemployment rate by counting every soul who works at least one hour in a week – often at far lower wages then before.

    3., forget to refer to the unavailability of CHEAP natural resources, for most or all the high grade ores are gone.

  7. Benedict@Large

    More mainstream crap by Wolf.

    “… We borrowed all this money …”

    In fact (regardless of the charade), the US can no more borrow its own currency than you or I can borrow our own IOUs. Both transactions are equally meaningless. The liability (essential if borrowing is taking place) is incurred when the money is issued, not when the “borrowing” charade is performed. The borrowing charade merely reclassifies (but DOES NOT INCREASE) the liability from a currency liability to a bond liability.

    Why do all these supposedly smart people refuse to apply the rules of accounting whenever they discuss macroeconomics, but apply them in every other case of money movements they care about? Why does macroeconomics get a free pass to have unbalanced books?

  8. JEHR

    I just wrote a long comment (that disappeared) listing all the ways that Harper has impressively screwed up so that Canada can be sure that it will have problems in the future.

  9. craazyman

    I had no idea you could get so many awards being an economic journalist. That’s amazing. I would have thought there’d be a fairly small audience for that sort of writing, but maybe an enthusiasm for bestowing credentials overwhelms whatever paucity it has in numbers.

    That’s the way it seems to me, actually, if I think about it. It’s the way the economics field seems to work. It doesn’t matter how wrong you are, or how little sense you make, or how you thrash about in a claustrophobic trap of total confusion like a flying insect in a spider’s web. Have you ever seen that? It’s kind of frightening, if you’re prone to anthropomorphism. But if you have the credentials, you can blithely ignore all failure of coherence, logic, rationality, insight or empathetic anthropomorphic sympathies — and just cruise to where the money is, on autopilot. hahahah

    Nevertheless, it looks like an interview worth watching if you’re trying to kill some time, which I do alot of. Maybe even tonight! But the transcript is much appreciated, just in case Youtube calls and takes over.

    1. craazyboy

      Much as I hate quoting dead economists, once and a while a real doozy floats up from memory.

      Greenspan on Bretton Woods II, back during it’s creation – “It may last 30 or 40 years.”

  10. Hugh

    We live in a world dominated by kleptocracy, wealth inequality, and class war. As we so often see Establishment figures in our elites are given kudos on top of all their regular privileges for recognizing that something is wrong. They have no coherent explanation for what that something is or how to change it, even though such an explanation is staring them in the face. But wow, aren’t they so insightful!

  11. E

    ‘There is a simple solution for the US housing problem – allow a hundred million Chinese people to come to America and buy the houses. And since they paid for them anyway, why not?’

    I think he’s tiptoeing around the big unmentionable–the reason why the bankers are all but untouchable, the reason why American regulators turned a blind eye for so long–the fraud was geopolitical gold for Washington. It kept the wars going, sucked all the captial away of Corporate America’s east asian rivals, and the final crash decisively destroyed Social Democracy in Europe.

    Noone abroad was in a position to call them on it, either–the American public was in a blood frenzy for most of the 00’s, and any crackdown by Europe or Asia that resulted in a purely American crash could well have got them a nuking for their pains.

  12. E

    ‘There is a simple solution for the US housing problem – allow a hundred million Chinese people to come to America and buy the houses. And since they paid for them anyway, why not?’

    I think he’s tiptoeing around the big unmentionable–the reason why the bankers are all but untouchable, the reason why American regulators turned a blind eye for so long–the fraud was geopolitical gold for Washington. It kept the wars going, sucked all the captial away from Corporate America’s east asian rivals, and the final crash decisively destroyed Social Democracy in Europe.

    Noone abroad was in a position to call them on it, either–the American public was in a blood frenzy for most of the 00’s, and any crackdown by Europe or Asia that resulted in a purely American crash could well have got them a nuking for their pains.

  13. Someone

    The negative comments about Martin Wolf are puzzling.
    I thought his presentation was superb, and he does commend Keynes’ view about macro-imbalances.
    Also, I’m not sure how much more hostile Wolf could be towards modern finance than he is here. Are people expecting him to declare that he’s a Marxist and for him to call for revolution?
    Anyway, thanks for the link to this video which I can’t seem to find on Youtube.

  14. bluffraise

    A massive deflationary wave was created as manufacturing shifted to 3rd world. Simple economics- they make goods cheaper. The big question is, who will be the sucker left holding the bad when the endgame is nigh.

  15. John

    Half the people I know no longer have the full-time, good paying jobs they had all their working adult lives.

    It’s a depression for millions of Americans.

  16. Fiver

    I’ve never been on of Wolf’s “we” and indeed most people have no idea whether they were or weren’t. I think, therefore, that this piece is either a signal, or more like a trial balloon, to get us ready for a steady diet of unorthodox Central Bank “experiments”, as always aimed at fooling the vast majority of the public into doing the wrong thing in order to reward whatever “right” thing there was that made those in actual control of the world’s wealth wealthier.

    As for Canada and Australia, both have bet huge on the wrongponies – a perpetual Chinese (or Asian, or emerging whatever) boom driving energy/resource/environment disastrous extraction economies, both with Governments that long-since sold out their nations and futures to the worst of worst in the extraction complex. And both have created massive bubbles in household spending tied directly to major industries we all know long before we exhaust the resources, we need to replace altogether, and soon. Canada is venting environmental concerns with each new well drilled, each new study telling the world something important is breaking down, that living in high-energy, high-waste, high-consumption economies destroys both the society and the living matrix within which it is.

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