By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Deal 2.0.
It doesn’t matter who leads the IMF when the institution is governed by ideology.
Greece and Ireland appear to have lost an important political ally with the sidelining of Dominique Strauss-Kahn as both plead for more financial assistance from European partners to avoid an early restructuring of debt. The key word is “appears,” as in truth, arsenic remains arsenic, even if it is coated in sugar by an ostensible champagne socialist like Mr. Strauss-Kahn.
The reality is far more brutal for all of Europe. The IMF is bank-centric. Its standard requirement is that any recipient of its “aid” maintain a primary budget surplus, which amounts to a prohibition against fighting recession by increasing domestic demand via fiscal stimulus. The rationalization behind all IMF programs is that countries that follow “sound” financial policies — balanced budgets, tight money, deregulation, and privatization of capital assets — will be rewarded with a stamp of creditworthiness. They should then benefit by being able to borrow from private capital markets on favorable terms, relative to their own histories and the record of countries which are deemed less responsible. In principle this should mean they can run deficits on their trade accounts, loan-finance the purchase of capital goods imports to support development, and maintain high levels of economic growth and job creation. They should be able to do all of this and still attract inflows of direct foreign capital investment.
The rationale of controlling government debt and budget deficits is also consistent with a prevailing rising neo-liberal orthodoxy that promotes inflation control as the macroeconomic policy priority and asserts the primacy of monetary policy (a narrow conception notwithstanding) over fiscal policy. Fiscal policy is forced by this inflation-first ideology to become a passive actor on the macroeconomic stage.
It has been clear for several decades, however, that this argument is a myth, and that the promised land it envisions is a mirage. Consider the Fund’s experience with East Asia in 1997. Having praised the governments’ economic management up to just weeks before the onset in July 1997, the Fund panicked as much as the investors, intensifying the pullout. It called for the closure of insolvent finance companies and banks without seeming to worry about how uninsured depositors were treated, which triggered bank runs; and it identified fundamental problems that had to be fixed before growth could resume, sending a message that the economies were structurally unsound.
In the intervening years, the IMF has learned nothing, but still peddles the same economic myths that have done so much damage to the global economy. Ireland was an early (and eager) austerity proponent — starting to cut in early 2009. We were told that things would be improving as a result of the public cutbacks because all those tax-fearing consumers and investors were poised and ready to spend their savings – which were being earmarked to pay back the higher taxes that were going to be inevitably imposed to pay back the deficits.
This nonsense was all of the rave as mainstream economists and public finance commentators supported the Irish government’s manic decision to impose fiscal austerity on its near-ruined economy. And its misguided financial guarantees to its banks — which were vastly oversized relative to the size of the economy – significantly worsened the country’s budget deficit. That “busted the budget” and generated the current problems. In important respects, Ireland reproduced the Icelandic problem, with similar results. As we know, the people of Iceland have recently voted to undo the bank bail-out in spite of threats issued by the likes of the IMF.
Same thing in Greece. Unfortunately, the IMF supported behind this destructive economic austerity even under Strauss-Kahn.
Most mainstream economists have not recognized that changes in the government sector balance will have (opposite) consequences for the nongovernment sector balance. This is not a theory but a simple accounting identity based on double-entry bookkeeping. The ECB doesn’t seem to get this; nor do the Germans; nor does the IMF. But it’s very simple (and being amply demonstrated in the current travails of the euro zone): When the government sector goes into deficit, the shortfall equals the additional private sector saving (or reduction of private sector deficit), plus additional net imports.
By adopting the euro, both Greece and Ireland abandoned the option of allowing their currency to depreciate as a means of improving its current account stance. Without this option, it is hard to imagine how either country could boost its exports, which is the only way either can escape their debt traps, given the inability to conduct an independent fiscal policy. Austerity of the kind advocated by Strauss-Kahn and his market fundamentalistas at the Fund damages private expectations (encouraging risk averse spending patterns and more saving) and directly reduces aggregate demand. The only thing that drives output, income and employment growth is spending, which is precisely what the IMF’s programs are designed to frustrate. That its destructive policy mixes have hitherto been coated in the honey-sweet words of a former French Socialist Finance Minister, does not make them any easier to swallow.
It’s the institution that’s the problem, no matter who takes over from Strauss-Kahn, whose future public career is almost certainly shredded regardless of the ultimate outcome of this particular case. Expecting the Fund to change is akin to painting a leopard black, and thinking that this will change its predatory behavior.
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Let us also remember that during the East Asia melt down, Malaysia told the IMF neolibs to take a hike and that country recovered faster than the others that were affected.
More importantly, Malaysia was the only country to quickly reinstate capital controls (or did Indonesia do so as well?), whereas in countries like South-Korea there was a huge transfer of ownership from domestic to foreign owners (because foreigners had the most money, given that the crisis concerned the value of all local currencies). institutionalized theft made possible by currency speculation is such a wonderful thing, however, that the IMF only recently released its new position paper in which it stated that “if there is really no other option left, it might be allowable to restrict capital flows”.
Ah well, I suppose he expected that woman to just roll over for him, very much like the countries the IMF has been raping across the globe for the imperial neoliberal scumbags in Washington and Western Europe.
Let us hope the Greeks, the Irish, and all the nations that ever accepted any so-called “assistance” from this criminal agency called the IMF will immediately default. That is the only way to stop these imperial vampires.
And let us hope the Eastern European countries who are in the EU but have not yet joined the Eurozone get some sense and do not give up their currencies and financial independence. Any Polish, Romanians, Hungarians, Bulgarians reading this? Keep your own currency – forever!
Psychoanalystus
PS — Do they still have the death penalty in New York? This piece of trash deserves it.
If you believe that Strauss-Kahn is a champagne-and-caviar socialist as Marshall Auerback does, then you probably also believe that he enjoys raping third world countries as symbolized in his alleged raping of a third world chambermaid in his luxury hotel room in New York City. But if you believe that he is a beer-and-bratwurst socialist as Paul Craig Roberts and Mike Whitney do (see links below), then you probably also believe that he is a victim of a honey-pot scheme paid for by either the bankster crowd within the Wall Street industrial complex or the bomb-Libya crowd within the military-industrial complex, or both.
http://www.informationclearinghouse.info/article28122.htm
http://smirkingchimp.com/thread/mike-whitney/36188/imf-chief-strauss-kahn-bagged-in-honey-trap
Now I have learned through Joseph Stiglitz (see first link below) that Strauss-Kahn was out to reform the IMF in such a way as to prevent taxpayers from indebted countries from becoming debt slaves to our western banking cartels. I have also learned through the Guardian (see second link below) that Strauss-Kahn is in favor of replacing the dollar with a global currency, and naming it “Bancor” in honor of Keynes, as a way to help curve instability in financial markets throughout the world. Coupling that with the fact that European socialists tend to oppose our imperial wars in the Middle East, I find myself siding with Paul Craig Roberts and Mike Whitney on this question as to whether Strauss-Kahn is innocent or guilty of raping a New York City chambermaid from the West African nation of Guinea.
http://www.project-syndicate.org/commentary/stiglitz138/English
http://www.guardian.co.uk/business/2011/feb/10/imf-boss-calls-for-world-currency
I agree. And let this be a lesson to other bankers who think about helping others.
On Nov 30, 1989, Alfred Herrhausen, then CEO of Deutsche Bank – some say the last reasonable one – was murdered in a very professional clandestine way in Frankfurt/Germany with a remote control bomb planted underneath the road surface at a spot where his car used to pass by. Before, he had spoken in favor of a soft landing of the East German economy after its integration into former West Germay (not so favorable for quick wins of the financial industry, and Wall Street in particular), and he suggested the gobal big banks should give up some of their debt claims towards poor third world countries. Remember, the Soviet communist empire was just about to crash.
Official suspect was radical left wing “red army fraction” – only it did not really exist any more at these days. Even more unlikely it would have had access to this type of logistics. No murderer has ever been indicted. Similar applies to the murder of Detlev Carsten Rohweder, head of the former privatization authority for East Germany’s assets of the state-run economy of East Germany. He was killed using a NATO military precision gun in his office at home in April 1991 from a distance of 200 ft. He had lobbied for a soft privatization of East Germay in order to allow time for accomodation of its economy. Again the Red Army Fraction was blamed for, but no murderer has ever been found.
And, of course, JFK was killed only two weeks after he had signed an executive order ordering that the U.S. print their own paper money, bypassing the private shareholders of the FED, in November 1963.
Is it perhaps due to the progress of mankind that nowadays people are killed by sex allegations rather than by bullets?
Of course we don’t know for sure, but it all stinks.
First of all, there’s no doubt that Strauss-Kahn is a champagne socialist. He’s a member of the French socialist party — whose champagne and wine bill is probably longer than the IMF’s list of destroyed economies. There’s nothing inherently wrong with being a champagne socialist — but Strauss-Kahn, a womanising Frenchman who hangs out with French Socialist Party members, is your grade A example.
Second of all, Auerback wasn’t really attacking Strauss-Kahn. He’s being quite clear: the IMF will not change regardless of whether Strauss-Kahn is at the helm or Arnie Schwarzenegger. It’s an institutional thing.
“When the government sector goes into deficit, the shortfall equals the additional private sector saving (or reduction of private sector deficit), plus additional net imports”. Not quite; you are either forgetting investment or forgetting to add the word “financial” in front of “saving”.
If you can forget your weakness for the saccharine solution of devaluation for a moment, the IMF is doing no more than asserting physics: you can’t consume what you don’t have. If the IMF is going to lend to a country, it not unreasonably wants to see evidence that the breathing space that the loan grants is used to tackle the problem that led to a deficit in the first place.
And by the way, Iceland did not vote to undo the bank bailout; Iceland’s banks were allowed to go bust. The vote was about whether Iceland repays Britain and the Netherlands what those countries expect, to cover some of their deposit insurance outlay. This issue now looks set to go to court, and if the court finds against Iceland, continued refusal to repay would amount to a sovereign default, so the IMF is right to be concerned.
RebelEconomist said: “…the IMF is doing no more than asserting physics: you can’t consume what you don’t have.”
What a fetid load of simplistic horse manure, as if what currently exists is the sum total of all that ever can exist.
Such dim-sightedness all goes back to mind-numbing stupidity of Ludwig von Mises:
The material means of production and the labor available have not increased; all that has increased is the quantity of the fiduciary media which can play the same role as money in the circulation of goods. The means of production and labor which have been diverted to the new enterprises have had to be taken away from other enterprises. Society is not sufficiently rich to permit the creation of new enterprises without taking anything away from other enterprises.
–Ludwig von Mises, The ‘Austrian’ Theory of the Trade Cycle
Just imagine, Mises wrote that in 1936, soon after the discovery of the East Texas Field when the nation was drowning in a sea of oil, official unemployment was 25% and a large percentage of the nation’s factories were shuttered.
No one has ever summed up the stone-blind dogmatism of the Austrian School better than Hannah Arendt:
At any rate, the result of the ‘American’ aversion from conceptual thought has been that the interpretation of American history, ever since Tocqueville, succumbed to theories whose roots of experience lay elsewhere, until in our own century this country has shown a deplorable inclination to succumb to and to magnify almost every fad and humbug which the disintegration not of the West but of the European political and social fabric after the First World War has brought into intellectual prominence. The strange magnification and, sometimes, distortion of a host of pseudo-scientific nonsense—-particularly in the social and psychological sciences—-may be due to the fact that these theories, once they had crossed the Atlantic, lost their basis of reality and with it all limitations through common sense. But the reason America has shown such ready receptivity to far-fetched ideas and grotesque notions may simply be that the human mind stands in need of concepts if it is to function at all; hence it will accept almost anything whenever its foremost tasks, the comprehensive understanding of reality and the coming of terms with it, is in danger of being compromised.
–Hannah Arendt, On Revolution
If one subscribes to the theories that Andres M. Lobaczewski put forth in Political Ponerology, I suppose instead of saying “Such dim-sightedness all goes back to the mind-numbing stupidity of Ludwig von Mises,” I should have said “Such dim-sightedness all goes back to the psychopathology of Ludwig von Mises.”
“as if what currently exists is the sum total of all that ever can exist”
That is not what I wrote. Greece can of course consume more if it produces more, and most of Europe will be hoping that it can. Or even better, produce more and consume no more, so that Greece can pay back the resources it owes.
Read carefully and think before responding.
Do you really think the answer is that simple? Consumption, production, and resources are only 3 factors and there are more. What about Greece’s problem with tax avoidance? My understanding is that tax avoidance in all social classes, not just the elite, is more extreme in Greece than other EU countries (do a search on – Greece tax avoidance), but increasing tax avoidance games by the elites in all countries hurts national economies. Since the IMF is run by the elites I see a problem here that doesn’t seem to tidily fit into those simple and convenient economic equations (note all the tax issues with Obama appointees and congresscritters)… and neither do black markets or underground markets (how does one even get semi-accurate data on those?).
Last year there were many articles on tax avoidance in Greece, here are two:
No tax please, we’re Greek http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/8509244.stm
Greek Tax Avoidance 101: Cover Your Swimming Pool With A Tarp, Fool A Satellite http://www.zerohedge.com/article/greek-tax-avoidance-101-cover-your-swimming-pool-tarp-fool-satellite
RebelEconomist,
One might buy into your little mind fuck if after the quote I cited you hadn’t followed up with the following:
If the IMF is going to lend to a country, it not unreasonably wants to see evidence that the breathing space that the loan grants is used to tackle the problem that led to a deficit in the first place.
Good grief! Enough of the lies and sophistries already, as if lending an already overly-indebted country even more money and then decreeing a deflationary death spiral is going “to tacke the problem that led to a deficit in the first place.”
I think Greece needs a bit of deflation in its costs so that it can become competitive again (eg in tourism, its most important industry).
But then since you think this is all a conspiracy, I might be an extra sent to stir you up like in the Truman show. Go and headbutt the most distant wall you can see to find out.
RebelEconomist,
The problem with your type of argumentation is that it’s a combination of pure rhetoric and zero evidence.
Normally a country caught in Greece’s situation could achieve competiveness by a devaluation of its currency. But not at all surprisingly, that option doesn’t seem to be available to Greece. Could that have something to do with the imposition of neoliberalism?
Come to find out, it has quite a lot to do with imposing neoliberalism. As Paul Cooney explains in Argentina’s Quarter Century Experiment with Neoliberalism: From Dictatorship to Depression,
The one aspect of the ‘Plan Cavallo’ which was not based on neoliberal ideology
was the pegging of the peso to the dollar at a rate of one-to-one, commonly referred to as convertibilidad or convertibility.13 Although inconsistent with the perspective of laissez-faire orthodoxy, convertibility was nevertheless accepted, if not supported by the IMF and Washington, right up until 1998….
The pegging of the peso to the dollar, also known as a currency board, was a clear advantage for foreign investors that did not have to worry about instability or sudden
devaluations causing major losses. There was an increased confidence in the Argentine bond market, as well as in the economy as a whole. The down side of convertibility was that Argentine goods were more expensive on the world market and imports were cheaper for Argentines, and thus contributed to a worsening trade deficit. The impact of convertibility on imports and exports is further discussed in the section on trade liberalization below.
It should come as no surprise that hardcore neoliberals kept pushing for even a more rigid form of convertibility as late as 2001, as Miguel Teubal points out in Rise and Collapse of Neoliberalism in Argentina:
A debate started in Argentina with regard to the persistence of convertibility and the presumed need to avoid a default at all costs in the servicing of foreign debt. Some, including the protracted hard line Menemistas, imbued with extreme orthodoxy, proposed advancing towards the fully fledged dollarization of the economy, a measure that had been adopted quite unsuccessfully in Ecuador.
It is just common sense, not neoliberalism. Devaluation shifts the whole array of prices in an economy rather just the ones that are uncompetitive, and therefore does a lot of collateral damage. Devaluation tends to work for a short time only as it reduces the pressure for structural change and its effect on competitiveness is undone by increased inflation. My view was formed by the experience of watching devaluation fail repeatedly in the UK in the 1960s and 70s.
• RebelEconomist said: “It is just common sense, not neoliberalism.”
No, it is theft, and on a scale that the world has never seen before.
• RebelEconomist said: “My view was formed by the experience of watching devaluation fail repeatedly in the UK in the 1960s and 70s.”
Is that all the evidence you can muster? Your anecdotal observations from 40 or 50 years ago?
But to be quite honest, I’m not at all surprised that that’s the sort of “evidence” that you drag out to try to exculpate the bankers’ crimes with.
Like I said before, your argument is all rhethoric and zero evidence.
RebelEconomist,
Could the reason you present zero evidence in support of your claims is because there is no evidence to support your claims?
For instance, you claim “Devaluation tends to work for a short time only as it reduces the pressure for structural change and its effect on competitiveness is undone by increased inflation.”
Funny that it worked the very opposite of what you claim in Argentina.
After several years of neoliberal Austeriansim, President De la Rua and his neoliberal guru, Domingo Cavallo, were forced to resign, escaping in a helicopter in the wee hours of December 20, 2001, Argentina defaulted on its foreign debt and devalued the peso to a fourth of its previous value.
It was not until May, 2003 that Argentina could elect a new president. But then look at the growth rates for 2004 through 2009, and compare those to 2000, 2001 and 2002 when Argentina was following the neoliberal Austerity mandate.
http://www.indexmundi.com/g/g.aspx?c=ar&v=66
This comment has been moderation for a while, which has never happened to me here before. I think I may have posted an “undesirable” link destination so trying again with some minor edits.
Rebel economist – Do you really think the answer is that simple? Consumption, production, and resources are only 3 factors and there are more. What about Greece’s problem with tax avoidance? My understanding is that tax avoidance in all social classes, not just the elite, is more extreme in Greece than other EU countries (do a search on – Greece tax avoidance), but increasing tax avoidance games by the elites in all countries hurts national economies. Since the IMF is run by the elites I see a problem here that doesn’t seem to tidily fit into those simple and convenient economic equations (note all the tax issues with Obama appointees and congresscritters)… and neither do black markets or underground markets (how does one even get semi-accurate data on those?) which are becoming ever larger percentages of many economies.
Last year there were many articles on tax avoidance in Greece (not talking about it much recently for some reason), here is a typical example:
No tax please, we’re Greek http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/8509244.stm
Yes, Greece is well known for tax avoidance, but that is hardly a reason for their creditors to go easy on them. Getting Greeks to pay tax may be a difficult problem to solve, but that is what they have to do if they want to be a serious European country.
they can produce all sorts of things, but nobody wants them — except for the ouzo, the olives and the islands.
that’s the problem with money. it distorts things.
say there’s 100 people who live as a gang in 20,000 BC. the hunters hunt and the canoemakers make canoes. and people make furs to wear in the winter and they gather herbs and cook the food.
they give and they take among themselves. nobody is unemployed. they might be lazy, but they get their butts kicked and they get to work to survive. and after one person makes and gives, it’s understood that an obligation to receive has been created. even if the thing received is not perfect. even if the watercolors are by a child, if it’s your child you hang them on the wall, to magnify the bond. even if they are not Picasso. it’s 2 halves of a whole. the give and the take, the duality of the singularity.
with Greece, with money, they have been given by those who have the ability to give. like a hunter handing over a deer for meat and for its hide. but those who gave, now they won’t take, because they say “you’re not competitive”. i can get your fruits and your fish for a nickel from a slave. why should I let you give something to me even though I honored myself by giving to you? why should i put your watercolors on my wall. i don’t know you and I don’t care.
Well. There’s a long answer to that, but this is perhaps not the right place for it.
Money has solved some problems, but it’s introduced others. It’s a butcher knife between the give and the take — the natural state of mankind for 50,000 years — It’s like a spiritual lobotomy. I’m not sure it’s the root of all evil, but if you follow it to where it came from, there is evil and good at the root, mixed up like a Martini.
Society is not sufficiently rich to permit the creation of new enterprises without taking anything away from other enterprises. L. V. Mises
Unless the money supply grows then money holders have an incentive to hoard money risk-free and profit off the risk taking of others. But then why should anyone take risks? Thus a static or slowly growing money supply leads to a stagnant economy.
All these arguments about money would be mute if we would simply agreed to disagree and allow full liberty in private money creation.
F. Beard I hear you speaking of private money creation a lot. Could anyone point me in the direction of some reading. I would like a better understanding of this issue. From the little I have read it seems that private currencies are in use in certain communities. For example “Ithaca Hours” in Ithaca NY. It seems though that the creation of private currencies is very regulated.
How would a deregulation of private currencies be effected by our current slack labor market? Would companies not attempt to offer unemployed workers jobs in their own private currencies rather than US dollars? How would this be different than when companies paid in scrip? Considering the excessive bargaining power of employers over employees and the lack of jobs it would be difficult for prospective employees to refuse. What kind of safeguards would need to be put in place to prevent this?
It seems without these considerations the complete deregulation of private currencies would only exacerbate and secure the power of the haves over the have-nots. What am I missing?
Could anyone point me in the direction of some reading. nikhil
Sorry. The only private currencies I have read about are PM based which are absurd.
I would like a better understanding of this issue. From the little I have read it seems that private currencies are in use in certain communities. For example “Ithaca Hours” in Ithaca NY. It seems though that the creation of private currencies is very regulated. Nikil
The problem is that Federal Reserve Notes enjoy a government enforced monopoly via legal tender laws and the capital gains tax on possible private money alternatives such as common stock.
How would a deregulation of private currencies be effected by our current slack labor market? Would companies not attempt to offer unemployed workers jobs in their own private currencies rather than US dollars? nikil
Hopefully they would. That would reduce unemployment and slack industrial output.
What kind of safeguards would need to be put in place to prevent this? nikhil
First the entire population including savers should be bailed out equally with new debt-free fiat. Not only is that just but it would also reduce their desperation. Second, the cause of the problem, the government backed counterfeiting cartel, the current banking system, should be abolished. No longer would business be able to steal purchasing power from the workers. Instead, business would have to genuinely share wealth with workers either through higher interest rates on their savings or via equity sharing.
What am I missing? nikhil
The 800 gorilla called the “government enforced monopoly money supply” for private debts that allow businesses to steal the purchasing power of their workers.
Yes paying them in company money would reduce unemployment but if that currency is not widely accepted wouldn’t this recreate the “company store” problem of the early part of the 20th century in the US as well as recently in other countries?
http://jurist.law.pitt.edu/paperchase/2008/09/mexico-supreme-court-orders-wal-mart-to.php
While your bailout idea sounds like an excellent “reset” button for the economy wouldn’t this be something that would have to be repeated periodically as wealth/influence/bargaining power/whatever accumulates into specific hands? Maybe I don’t understand it fully but it seems the political hurdles to accomplish this would be daunting.
It just seems like this would just add a whole extra level of speculation to the economy. For every transaction not only would I have to consider the value of the commodity being sold but also the future viability of whatever currency I would be paid in. I sell a house to you for “F.Beard dollars” instead of US dollars and in both cases you get the house and depending on the situation I may end up with nothing. Why would this be more attractive than being paid in the national currency of the state?
“If the IMF is going to lend to a country, it not unreasonably wants to see evidence that the breathing space that the loan grants is used to tackle the problem that led to a deficit in the first place.”
That’s not what the IMF are concerned with. The IMF are strictly concerned with ideology — as Auerback said.
Take Ireland as an example. The deficit is basically caused by taking on loans made by the private sector to inflate a housing bubble. Are the IMF and Europe worried that if they don’t impose austerity the private banking sector will reinflate the housing bubble by extending more loans? I doubt it (but if you want to get me quotes from a high-level IMF official to the contrary, be my guest).
Now, you’ll say that you were talking about Greece and the like. I still don’t buy your argument — but even if it applies to Greece, it doesn’t hold for Ireland, so it’s bunk.
The IMF’s position is at once more complex and more simple than all this. They BELIEVE in the policies they prescribe. They don’t believe in expansive fiscal policy is necessary for an indebted country — regardless of possible depression.
The key word is “appears,” as in truth, arsenic remains arsenic, even if it is coated in sugar by an ostensible champagne socialist like Mr. Strauss-Kahn.
True. It’s pathetic how desperate liberal elitists are to find some “elite” somewhere to believe in, that if Strauss-Kahn disagreed with Geithner on whether Ireland should be raped all the way or just 90% of the way, this qualifies him as a populist hero.
This also is clear:
It has been clear for several decades, however, that this argument is a myth, and that the promised land it envisions is a mirage…..
In the intervening years, the IMF has learned nothing, but still peddles the same economic myths that have done so much damage to the global economy.
Since the record is so clear, and it’s long been impossible to make a mistake about it, the phrasing should be, “The IMF’s intentional criminality has long been clear, as it continues to peddle the same policies which have been proven to do nothing but economic damage.”
And that lead us to this pernicious way of looking at things:
Most mainstream economists have not recognized that changes in the government sector balance will have (opposite) consequences for the nongovernment sector balance.
The post had just stipulated a few paragraphs back that this “has been clear for several decades”. So how is it possible for anyone with any knowledge at all to be mistaken about any of it, or “failing to recognize”?
It’s not possible. They recognize their lies and crimes perfectly well. But they’re paid to tell these lies and commit these crimes, so that’s what they do.
The “honest ignorance” myth, just like the “Democrats are well-meaning but weak” myth, only helps to keep us down.
“The “honest ignorance” myth, just like the “Democrats are well-meaning but weak” myth, only helps to keep us down.”
Exactly. And to add, (from Jesse’s today) “Propaganda does not deceive people; it merely helps them to deceive themselves.” Eric Hoffer.
There’s no stopping the merry-go-round until we decide we want to get off.
A major disincentive for people to get off the merry-go-round is that their friends and family are still participating (doesn’t matter what party they belong to). I found that out by accident. My studies led me to the realization that I had to get off the propaganda merry-go-round but it’s been hard on my social life, esp. in 2008 and 2009. It was much easier when I had similar conventional liberal beliefs as my friends. Initially I was excited to share my discoveries, but given the poor response I have taken to avoiding political discussions unless I “vet” people first. When I have tried to cautiously explain that my beliefs shifted due to my self-educational efforts and learning to look at the world differently, it mostly does not go over well (and these people all went to “good schools” and are quite smart in other areas of life). Most people don’t care that you discover new facts or information, they want the comfort and familiarity of shared likes and dislikes.
Now that a few friends have fallen out of love with Obama, and finally figured out on their own that there is not much difference between the two political parties (and gone “independent”) I find them more ready listen to other ideas and perspectives. However, I find that both liberals and conservatives are seriously reluctant to talk about propaganda, or even to use the word. I notice people generally shut their minds right down when I bring it up.
Corresction, I meant to say this:
I find that both liberals and conservatives are seriously reluctant to talk about propaganda unless it’s about the OTHER team. One’s own team, quite naturally, does not do this (much).
http://www.g20.org/about_what_is_g20.aspx
Who actually makes those decisions concerning the Responsibility to Protect. Is this the ideology behind the rampaging blue-eyed bandits? If the euro/dollar is fixed, will the ECB take over Federal Reserve function?
Where will the global regulation take place? TBA?
“The G-20 also works with, and encourages, other international groups and organizations, such as the Financial Stability Board and the Basel Committee on Banking Supervision, in progressing international and domestic economic policy reforms.”
Will the Bank of International Settlements emerge as the ‘world regulator’?
http://www.pbs.org/wgbh/pages/frontline/shows/nazis/readings/
There’s looking to be one hell of an historical hiccup.
“The ECB doesn’t seem to get this; nor do the Germans; nor does the IMF. But it’s very simple (and being amply demonstrated in the current travails of the euro zone): When the government sector goes into deficit, the shortfall equals the additional private sector saving (or reduction of private sector deficit), plus additional net imports.”
Yes, within a closed system prior. But the introduction of fiat sdr to provide liquidity for favored banking agency and the delinking of the yuan from the dollar-indexed-currency gyres creates a system in which 1 + 1 does not equal 2 anymore.
Auerback said: “In the intervening years, the IMF has learned nothing…”
If one takes a look at the IMF’s true goals, and not its stated goals, then its “failure” to learn makes perfect sense.
It seems Auerback still hasn’t woken up to the fact that these are not nice people. “Anti-government” is the only agenda of the IMF. Everything else—-any talk of healthy, stable and growing economies—-is a lie. Whether a government has the popular support of the people is simply not important (think Allende).
The IMF has adopted a two-step method to destroy sovereign governments. Step one is to get a nation overly indebted. Step two is then to wield that debt like a Samurai sword to decapitate popular government programs and chop off large parts of government infrastructure to be privatized. Government regulation also gets lobbed off. In the “blackwhite”*** of IMF, “freedom” becomes “license,” and multinational corporations are given “freedom” to rape and plunder at will.
In The Success & Failure of Neoliberalism C P Chandrasekhar observes that “a feature of the recent global conjuncture, starting with the 1997 crisis in East Asia and culminating in the financial crisis and Great Recession of more recent date, is that while economic events have discredited neoliberalism as an economic ideology, it continues to dominate policy discourse and practice.” How can this be so? Perhaps Reinhold Niebuhr in Moral Man & Immoral Society provides the answer:
Thus, for instance, a laissez faire economic theory is maintained in an industrial era through the ignorant belief that the general welfare is best served by placing the least possible political restraints upon economic activity. The history of the past hundred years (this was written in 1932) is a refutation of the theory; but it is still maintained, or is dying a too lingering death, particularly in nations as politically incompetent as our own. Its survival is due to the ignorance of those who suffer injustice from the application of this theory to modern industrial life but fail to attribute their difficulties to the social anarchy and political irresponsibility which the theory sanctions. Their ignorance permits the beneficiaries of the present anarchic industrial system to make dishonest use of the waning prestige of laissez faire economics. The men of power in modern industry would not, of course, capitulate simply because the social philosophy by which they justify their policies had been discredited. When power is robbed of the shining armor of political, moral and philosophical theories, by which it defends itself, it will fight on without armor; but it will be more vulnerable, and the strength of its enemies is increased.
***The keyword here is ‘blackwhite’. Like so many Newspeak words, this word has two mutually contradictory meanings. Applied to an opponent, it means a loyal willingness to say that black is white when Party discipline demands this. But it means also the ability to believe that black is white, and more, to know that black is white, and to forget that one has ever believed the contrary. This demands a continuous alteration of the past, made possible by the system of thought which really embraces all the rest, and which is known in Newspeak as doublethink.
▬George Orwell, 1984
I’m currently reading Andrew M. Lobaczewski’s Political Ponerology: A Science on the Nature of Evil Adjusted for Political Purposes.
The actions of the IMF make perfect sense when viewed through Lobaczewski’s lens. The truth is that the IMF needs a name change. A much more appropriate name would be the IPF—-the International Psychopath’s Fraternity.
Lobaczewski argues, quite the opposite of the reigning economic orthodoxy that holds that all men are homo economicus, that all bears are not the same. His study deals with variations “differentiating persons whose instinctual human substratum is normal from those who are carriers of an instinctual bio-psychological defect, though they are members of the same race and civilizations.”
Lobaczewski goes on to explain that:
The more we progress in this understanding, the more social doctrines strike us as primitive and psychologically naïve, especially those based on the thoughts of thinkers living during the 18th and 19th centuries which were characterized by a dearth of psychological perception. The suggestive nature of these doctrines derives from their oversimplification of reality, something easily adapted and used in political propaganda. These doctrines and ideologies show their basic faults, in regard to the understanding of human personalities and differences among people, all rather clearly if viewed in the light of our natural language of psychological concepts, and even more so in the light of objective language.
“Step one is to get a nation overly indebted.”
I’m no fan of the IMF, but could you explain exactly how the IMF forced Greece and Ireland to borrow all this money?
Why ask him to explain when Simon Johnson does a much better job?
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/
You 1.) find a country with resources that you want, 2.) install corrupt elites who borrow from you and distribute proceeds to their cronies, 3.) let them borrow more as necessary, 4.) when they get thrown out of power assert your right to take their resources because they can’t pay it back.
Internality,
Exactly!
For the forensics of how the crime is perpetuated, with all the sordid details, there are these two studies on Argentina:
Argentina’s Quarter Century Experiment with Neoliberalism: From Dictatorship to Depression, and
Rise and Collapse of Neoliberalism in Argentina
Suppose a perfect counterfeiter set up in your town except he did not spend his money; he lent it out at very low interest rates. Would not everyone have an incentive to borrow from him to avoid being priced out of the market by those who did?
Thus it is internationally too. Nations that don’t borrow from the money creators risk being left behind by those who do.
The whole banking system is a clever rat race which has enslaved the whole world with few exceptions.
How can one put all the blame on the IMF for the euro’s fundamental faults? The euro is a failed system. Nations that voluntarily surrender their Monetary Sovereignty tacitly assume they will have a positive balance of payments. Without that, they absolutely, positively will fail.
But, since all nations cannot have a positive balance of payments, some will fail. The IMF philosophy is merely an extension of the ignorance that created the euro.
Rodger Malcolm Mitchell
Usury is mathematically unsustainable because the debt compounds at a rate greater than the real economy can grow. This is true because the lenders will always insist on real profits.
So then, why is our money supply lent into existence?
You assume principal and interest is always paid back, when in fact, a loan is a gamble (as is everything in life) and there is no assurance that it will be repaid in whole or in part, whether it is recourse or nonrecourse.
Sophistries almost always depend on ludicrous assumptions that can be disproven by actual facts in less than five seconds.
Sophistries almost always depend on ludicrous assumptions that can be disproven by actual facts in less than five seconds. Anonymous Jones
Actually you have helped make the case that usury is unsustainable when you said :
“You assume principal and interest is always paid back, when in fact, a loan is a gamble (as is everything in life) and there is no assurance that it will be repaid in whole or in part, whether it is recourse or nonrecourse. “
Other alternative media see it like this:
http://www.smirkingchimp.com/node/36263
However their view basically supports yours, even though it is more favorable about DSK.
There are lots of places where any suspicion of the ostensible crime is attacked as misogynistic blame-the-victim. That’s the handy thing about sex crimes. But after Spitzer and Assange and Murray, it’s useful to remember that there are two parties under suspicion here, DSK and the corporatist state.
http://www.craigmurray.org.uk/archives/2011/05/sexual-allegations-and-government-fit-ups/
http://www.craigmurray.org.uk/archives/2011/05/rape/
Or even better, produce more and consume no more, so that Greece can pay back the resources it owes. rebeleconomist
You conflate “resources” (capital) with money. The banks created that loan money on their balance sheets and took a risk that it could be paid back. The risk failed. The banks are out of luck. They are owed nothing since the loans were not backed by collateral.
http://www.bloomberg.com/news/2011-05-19/ecb-could-still-take-greek-collateral-after-default-rbs-says.html
http://uk.reuters.com/article/2010/05/18/idUKLDE64H2HU20100518
“Blessing said he did not see a need to restructure Greece’s debt, which would hit German banks — among the biggest creditors of Greece along with peers in France and Switzerland.”
Think it is interesting how the view of IMF changed after the financial crisis and now so many countries have accepted their help. True that their policies are very harsh and they are most likely very outdated. But I believe that without IMF’s help Germany would never have agreed to lend any money. Thus creating an even worsen crisis for the Euro than we see today.
Aren’t the Treasury dept. ministers working for the IMF and not their own ‘sovereigns’? One wonders what agency the multilateral organization represents.
Paneuropa?
Yes paying them in company money would reduce unemployment but if that currency is not widely accepted wouldn’t this recreate the “company store” problem of the early part of the 20th century in the US as well as recently in other countries? nikhil
Well, without the government enforced counterfeiting cartel to borrow from then I’d bet that companies would not be able to exploit their workers as they did in the past.
While your bailout idea sounds like an excellent “reset” button for the economy wouldn’t this be something that would have to be repeated periodically as wealth/influence/bargaining power/whatever accumulates into specific hands? nikhil
Maybe. Periodic debt forgiveness (every 7 years) is commanded in Deuteronomy 15. However, if the unjust causes for wealth inequality are removed then why would the need for a periodic reset persist?
Maybe I don’t understand it fully but it seems the political hurdles to accomplish this would be daunting. nikhil
“Some need to feel the heat before they see the light.”
It just seems like this would just add a whole extra level of speculation to the economy. For every transaction not only would I have to consider the value of the commodity being sold but also the future viability of whatever currency I would be paid in. I sell a house to you for “F.Beard dollars” instead of US dollars and in both cases you get the house and depending on the situation I may end up with nothing. Why would this be more attractive than being paid in the national currency of the state? nikhil
You could always deal exclusively with the national currency if you wished.
I am not a trained economist, but if equitability is a key goal, would (elements of) Muslim banking avoid/solve some of these problems?