This is a terrific short video on why the Great Moderation and the underlying restructuring of the economy during that period, wasn’t all it was cracked up to be. Economists celebrated the appearance of more stable growth, when in fact, the condition of the patient was deteriorating.
I won’t spoil it by telling you where it is, but there is a key visual in this presentation that all by itself is reason for viewing.
I hope you’ll circulate this widely, since it’s accessible and compelling. Hat tip Lars P. Syll.
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Really brilliant video. I love the way the graphs self-explain with live arrows. Partner is off to use it in a lecture. I’m never convinced economics has much to do with the way we’ve ended-up despite the argument behind this video. We have deeper organisational problems and ideologies, and a medieval form of money and work organisation/motivation and reward. I don’t think we get the real arguments from those who have secretly supported giving more and more to the top as we were generally doing worse or being caught by the developing world. Plus it hardly takes economics to realise that massive war spending and scrabbling to rebuild after being laid waste would produce a boom for a while. I am yet to meet a businessperson who takes economics seriously and only a few with much clue about the subject. It looks more and more like Latin mass to me, gleaning authority through mumbojumbo in public whilst Cardinal Richlieu does different work in secret.
What stops a large number of countries agreeing full-employment policies? What would we do if we found out a small group of people had caused all the misery of unemployment across, say, the G20 for 40 years? And in the “great moderation” we seem to have tooled up to produce loads of crap we don’t need and do us damage. I sense the economists already beat me in forming their own Groaf Oaf Party (GOP honestly coincidental). This said, it would be great to see this video spring up everytime some BBC-invited loon starts talking green shoots recovery claptrap.
Synchronicity at work or what ? This http://s21.postimg.org/msm6waehj/Con_Rubbish.jpg just shoved through my undeserving letter box and needing no additional commentary from me. Except perhaps “we’re doomed !”
@ allcoppedout: Couldn’t agree more.
This is fantastic.
“Since the narrower or wider community of the peoples of the earth has developed so far that a violation of rights in one place is felt throughout the world, the idea of a law of world citizenship is no high-flown or exaggerated notion.” Kant, 200 years before the internet.
yes, ‘splain that to 200+ Nigerian schoolgirls…….
@Allcoppedpout
full-employment policies?
You are falling for the NC elitist trap.
Both of those characters in the above video were top down merchants of debt.
Bollox is everywhere.
The Centralization vortice – be it of whatever stripe is a pox on humanity.
PS
We don’t have a medieval form of money.
We live within a Cromwellian fascist superstate.
Where tax obligations come forth from a mysterious tabernacle of debt / death rather then a agreeded before the event contract between the King and nobles.
By 1990 two things were plain: 1) Global Warming (as it was called then) was a reality; and 2) the U.S. political-economy was driving firmly and solidly towards neofeudalism which is the ultimate goal of the oligarchs. In my view, we’ve had nearly a quarter-century to realize these trends and not only have we done nothing about them but both the mainstream media and the American intellectual class has not really come to terms with either of those two problems.
Let me put it another way to restate my constant theme that our problems are cultural and not so much political. While our political institutions have been compromised and the Constitution largely bypassed in all kinds of ways there still exists a theoretical capacity to create political change in the U.S. But the facts point in one direction–the vast majority of the American people do not want the fundamental change that the two issues I mentioned above would require. Those of us who are critics of the current system have to go beyond class-struggle, culture-wars “moral” issues and all the usual nonsense and face the fact that U.S. society is insane and has, it seems, no ability at all to heal because the fundamental ties that keep people together in a society have been broken by contemporary culture and the world outside the U.S. is even more insane to the degree they have bought into the U.S. produced globalized system.
Most of us agree with the video (how could you not and be rational?) and we try to debunk much of contemporary economic thought (which mainly ignores the figures in the video) and that’s a good thing but we won’t be effective until we expand the examination of the facts to the culture as a whole. We do have to answer how and why in a reasonably democratic society have we come to this? I say it starts with fundamental philosophical/metaphysical/mythological frameworks. Without addressing these factors we cannot expect to change anything for the better.
I see it as a “revolt of the haves.” The rich and their minions never stopped yearning for a return to the dominance and hierarchy of an earlier time. By the early 1970s they had sympathetic ears in those who wanted to put blacks (and women) “back in their place.” This, of course, implied that everyone had a place, something white men in the period 1933-68 had rejected. But now they were ready to listen to those who challenged the official egalitarian ideology of post-war America (where “we have no classes here” had been a rebuff to Communism). Ironically. In this process losing the Vietnam War helped the rich enormously, as it also indicated that traditional hierarchies of race and nation were out of whack. That’s one side of the story.
The other side of the story is that the educated classes embraced various forms of relativism. Constraint was out. Rather than fight through the process of finding out what we believe and agreeing to act that way a la Rorty, they just wanted to be left to “do their own thing.” This left them ideologically naked in front of the Right-wing juggernaut. Educated Dems found that they had no language or beliefs to fight back against “every man for himself” Reaganism. Once intellectuals rejected universal values, they could only speak, if they chose to speak at all, in technocratic language. Or they could complain about how stupid and nasty Republicans were, but with nothing to back those claims because that would have implied that there were clear, unalterable rights and wrongs.
I’m sure other factors were at play, but on the cultural front, I think the needs of the few to reassert dominance and superiority (I’m richer therefore I’m better and more deserving) and the collapse of an overarching vision and language of civic ethics and communal responsibility among the educated got us here.
You and Banger both make some excellent points. Yet I am not convinced that huge numbers of people have irretrievably lost their moral compass. They have been deliberately bamboozled to blame everyone but the kleptocrats for all their misfortunes.
Fortunately, the kleptocrats’ neoliberal propaganda has become so insanely overwrought that people are no longer buying it.
I believe we are at a moment where people would be ready to embrace very radical change. The danger is that hard-right fascists may try to manipulate this general anti-establishment mood– to abolish the few restraints on harsh authoritarianism remaining from what’s left of American and European bourgeois republican traditions.
These fascists will come carrying a cross and draped in the flag. They will promise bread, circuses, and a return to the “good old days” of patriarchal order. If they succeed in gaining full spectrum dominance they will certainly make Orwell look like a cockeyed optimist!!
What these fascists most hope for is to keep all potential resistance preoccupied with the sort of NIMBY consumerist “activism” that affluent white folks in wealthy enclaves in places like Vermont, Oregon, etc. are engaged in. I am all for shopping at the Farmers’ Market, composting, making my own clothes from hemp, etc., yet I am not so deluded as to think that by themselves these worthy “lifestyle choices,” add up to a revolution.
We are not going to defeat men who spend hours shooting semi-automatic weapons on firing ranges by buying only eggs laid by free-range chickens!! I went to that website recommended by Ran, and, while I admire the righteous zeal of the folks involved, it was frightening to see how intelligent people could embrace such ahistorical, nonsensical drivel.
As Banger keeps saying we need a positive, alternative vision. We could do worse than start with the simple call for solidarity implied by the labor motto: “an injury to one is an injury to all.” Let’s take away the swords now held at our throats by those who injure us, beat them into ploughshares, and start taking care of all our brothers and sisters!
“They have been deliberately bamboozled to blame everyone but the kleptocrats for all their misfortunes.”
This is completely true, yet I remain baffled that so many can buy the b.s. and somehow avoid really seeing what’s going on. Why are some of us able to see reality for what it is, while others can *blissfully* go about with their heads in the sand pointing fingers of blame at some horrid “other” in the 99%? All while utterly ignoring the 1% and the horrors that they’ve unleased on the world?
I’m just muttering here. I have no answers or solutions anymore. Whether those I know are the most deluded of Tea Partiers, or the most avid of Ayn Randian “Libertarians,” or the most mellow of hippie liberals… to a person, almost none of them seem to want to contemplate what the 1% has become, how badly they are mis-using what remains of our “government,” etc. All the while, happily finding fault with one group or another of villains in the 99% and pointing fingers of blame at them. And then rolling over and going back to sleep.
Appeals to intellect, providing of facts, whatever… nothing seems to matter. I get it that, at rock bottom, most people are probably frightened by what has been happening over the past 30 + years, but this seems to have paralyzed them into clinging to their authoritarian mind-sets. The truth is certainly not setting them free. They’d rather bow and scrape to whatever tin-pot god they’ve erected for themselves, whether it’s Rush/Glenn/Sean, their mega “church,” Obama, or whatever.
I still try to get through to people, but it’s a tough row to hoe. My friends who do see reality pretty clearly are equally at a loss as to how to awaken others that they know. Somehow the Mad Men have been very effective at their propaganda and brainwashing.
I agree that this is more than a political problem. It’s truly a social disorder, but how we get people to wake up and then get up & stand up for their rights (to quote the fabulous Bob Marley) is beyond me. From where I sit, as long as the riff-raff is complacent and thinks that they’re ‘safe’ with their belief in whatever tin-pot god they’ve erected for themselves, we’re sort of screwed.
That said, the so-called “left” has been utterly bereft of any real leaders for a long long time. And when a popular uprising occurs, the Nazi storm troopers are their quick-smart to squash it like a bug. Lessons to be learned.
Your comment reflects precisely why I say we have a cultural problem not a political problem. Even the idea that the 1% are oppressing the 99% is way off–it is the .01% that runs the show–the others derive their power and status from the aristocrats at the top.
Here’s a heresy that always gets people here irritated–the majority of the population wants this set up–they want to be told what to think and what to do by their “betters” but can’t admit that because, officially, we are a “democracy.” So explain the popularity of the English Royals and all the shows that glorify rigid class-structure of 19th and early 20th century English society–particulary the grand houses of England.
In a time of confusion, rapidly changing morals, families splitting up, communities and industries exploding as we move here and there to find a better life and to find work. We want solidity and order and thus tacitly support the gulags, the secret police activities the constant surveillance. The authorities and oligarchs have no choice but to win the class war since the lower and middle-classes just want to be servants and watch the glitterati parade in sequined gowns as we marvel at their escapades and chant their names as they preen before us. Yes, the Mad Men have created a series of magic spells and whispered sweet nothings in our ears–we know they want to deceive us but we want to be decieved–that’s why no amount of logic will move the average person, no scientific study means a damn thing and no clear solution to our problems can ever be enacted.
“Here’s a heresy that always gets people here irritated–the majority of the population wants this set up…”
I agree. I think some folks around here just cannot accept that the authoritarian right is what the majority want. Romney and Obama are both right-authoritarian and there is almost no difference between them — they received 98.3% of the vote in 2012. 58.2% of eligible voters voted. 98.3% of 58.2% is 57% So a majority of U.S voting age citizens validated right-authoritarianism. I think a lot of us here lean left-libertarian (I certainly do). The presidential candidate most representative of left-libertarian views in the 2012 presidential election was Jill Stein. She received 0.36 percent of the vote. This is anecdotal, of course, but I still think it speaks volumes.
Well said. I think the dominant fact is the trap of relativism that the left found itself in. I was part of the hippy generation and we believed “do your own thing” but it not meant in the way it is meant now. We valued community and felt that personal liberation was a requirement for healthy community–we believed in being ourselves within the context of love–the two ideas were really one idea. But the hustlers used what was “in the air” to destroy that period of spiritual rebirth of stillbirth. The movement was premature–people were far to steeped in the money-ethic. By the mid-seventies hippies were, for the most part, done and it was all about money, sex, career, cocaine and real-estate for the vast majority of my generation.
This is true Banger. The debates have been around a long time though. Off-hand, ‘Silent Spring’ was out in 62.
What changed in 1971, at the end of what this video styles the ‘Golden Age of Capitalism’?
Our currency. Under the Bretton Woods regime, which Maynard Keynes helped design, the USD was the world’s reserve currency. Other sovereigns could redeem dollars for gold. But the U.S. grossly abused this privilege with Johnson’s gunz ‘n butter welfare/warfare programs, whilst France’s deGaulle drained gold from New York.
So on 15 August 1971, Nixon pulled the plug on dollar redeemability. Though it goes unmentioned, that’s the inflection point on every single chart in the video.
Unlike their coupon-clipping 19th century predecessors, today’s plutocrats have learnt to exploit fiat-currency inflation to their immense benefit. If the hoi polloi can be deceived into believing that E-Z money is actually a ‘progressive’ policy, ALL THE BETTER: no resistance!
*lights a cigar with a fresh fiat hundred*
lol.
‘Nuff said.
Good work, goldbug, confusing correlation with causality. You almost had me. In stitches.
Keynes walked out on the negotiations for the system when USA insisted on their dollar being the reserve currency. Keynes wanted there to be a non-national currency specifically reserved for international trade. This to act as a self-stabilizing force, as a import prone nation would find it increasingly hard to get more of said currency over time.
Seriously i think Keynes would be furious to have his name attached to post war economics, as very little of it actually connects back to what he was thinking and writing beforehand.
That is also the timeline I see it but I do not think we can go back to a currency backed by gold. Keynes was almost the definition of conservative in comparison to Greenspan who just made everything up. Keynes’ policies precluded the Vietnam war because we clearly could not afford it; Greenspan’s predecessors facilitated it illegally. Khruschev, in c. 1960 said “We will bury you!” by which he meant their command society could be mobilized faster and longer than our profit driven one. This is now exhibit one for the power of the American oligarchy – a scorched earth victory brought to us by 70 years of private banking colluding with a single-minded military dictatorship. But now we are faced with a different world, as Banger says, it’s even crazier outside the US where capitalism is the model. There isn’t enough gold to back the amount of currency needed to create a good society here or anywhere else. Not to mention clean up the environment. What we need, ironically, is something closer to Khruschev’s idea of a well-functioning society. Unless private money can once again perform magic and organize itself to meet all of our new demands. I don’t think that is possible in a profit driven system. A system that currently is destroying the planet.
Greenspan just made everything up. Now there’s a gold standard. If the Iter (hot fusion) programme comes through we might have an example of change through technology, with oil and gas fading away. Physics offers more hope than echo-nomics. We could , of course, just get on with building a decent society with an honest accounting system.
I dunno about hope.
http://www.energybulletin.net/stories/2012-04-11/exponential-economist-meets-finite-physicist
I don’t think you’re entirely wrong here, but there are probably other significant correlations to consider as well. Maybe peak U.S. oil production for instance (before far more difficult forms of fossil fuel exploitation at least). That happened in 1970, pretty much EXACTLY the same time.
The country had already bankrupted itself with Vietnam (why it had to go off redeemability – something to remember – a more flexible currency isn’t so great if you just use it to fight endless wars) and the decline in REAL natural resources can’t be entirely insignificant.
There is something in what you say, but your overstate it. As has been pointed out, Peak US Oil, Vietnam, the Eurodollar markets, overall global GNP growth in the period 1946-1970, and the inability of gold reserves to keep up with that growth, all played a part. America was not prepared for the hardship of revaluing gold and ipso facto devaluing the dollar that would have been necessary to keep the gold window open. Someone must have crunched the numbers and see that as America’s need for foreign oil grew, we’d either lose all our gold or shiver in the dark. A run on gold was in the cards, and no gold standard can survive hording. Like fiat currency, to function a gold standard needs confidence and a willingness not to try to undermine the critical currency. If for whatever reason too many people head for the exit and demand their gold, the system collapses. That’s was becoming a distinct possibility in 1971. The crisis was mismanaged, but it was a real crisis.
Should be required viewing for all voters, particularly members of Congress.
but…but….we all have iphones, flat screens, and Chipotle! What more do the peasants want?
I dunno how much of the “golden age” was really Keynes, and how much was Samuelson claiming to be Keynes…
How all powerpoints should be done.
Seconded!
Yves – what was your favorite part of this video? There were so many possible choices for me to guess from. My vote was for the slide that showed the differences between the golden age and the great moderation (wage led-growth vs debt led-growth, etc).
Brilliant video.
And–I love the music. It adds to the video’s effectiveness, making difficult truths easier to be received, absorbed and accepted. The music here is a great example of the importance of intangibles, an importance which might not be reflected in the financial bottom line.
Ditto.
What this video did not reveal is how the professional class allowed [and still allows] all of this to take place.
It is not that these things happen [as this is the history of our kind], it is ‘the why’ and ‘the how’ of it. It is here that people bury their heads in the ground and refuse to own up to their complicity.
[“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone. “]
~J.M. Keynes
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Say what you want about that dead aristocrat… but his writings had a certain “witty spark” to them that we don’t see in today’s generation….
Speaking of J. M. Keynes, over the years I’ve collected a few items by him and about him….
“When the capital development of a nation becomes the by-product of a casino, the job is likely to be ill done.” –John Maynard Keynes, “The General Theory of Employment…..”, 1936, p. 159.
“It is suicidal to act rationally in an irrational market”
“Speculating? (It is) the activity of forecasting the psychology of the market”
“Yet it is safer to be a speculator than an investor in the sense that a speculator is one who runs risks of which he is aware and an investor runs risks of which he is unaware.”
“The social object of skilled investment should to defeat the dark forces of time and ignorance which envelop our future. The actual private object of the most skilled investment today (note, written in 1936) is to ‘to beat the gun’, as the Americans so well express it, to outwit the crowd, and to pass the bad or depreciating half-crown to the other fellow.”
“…professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one’s judgement, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.” The General Theory, 1936
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Gentle Readers, lest you consider the man to be a mere pontificator, I wish to inform you of the British wheat market in ’37:
One fact (out of hundreds) that I didn’t learn in school regarding Keynes was that in addition to being the leading economic thinker of the 30’s and 40’s (d. 1946) , was that he was an active speculator in commodities. He initiated a position in wheat futures in the Chicago market in early 1937, (trading from his home base of King’s College, Cambridge). Soon the action took him into the Buenos Aires market as well. As luck would have it, his positions went under water and Keynes decided to take delivery of the wheat he had contracted for. As the ships steamed up the Thames and into London. Keynes was spotted measuring up the King’s College chapel for use as a temporary grainery! He discovered that it was too small by half. You see, at the time Keynes owned the equivalent of a one months supply of wheat for all of Great Britain. Well, when the first of the ships docked, Keynes met the seller’s representative to inspect the grain. Keynes claimed, and was subsequently proven correct, that the grain was not clean. (The standard test was to count the number of weevils in a cubic foot of grain, a tally over 30 weevils meant rejection.) So for the next month, the sellers agent directed day laborers in the removal of weevils from the wheat. At about the third week, a stockbroker who happened to be a member of the Tuesday Club, and privy to the machinations of Prof. Keynes, ran into one of England’s largest millers. The flour man complained bitterly about some “damn speculator” who had cornered the wheat market. The broker kept his mouth shut, but reported back to Keynes. Indeed, prices moved up sharply and Keynes made a tidy profit when he finally released the grain onto the spot market!
MMT Movie: Economics for Dummiez
http://www.youtube.com/watch?v=4bXpOUYrr1c