This blog is about money. It’s about jobs. It’s about government, and companies, and people and ideas. It’s about technology, and industry and capitalism. It’s about globalization, Europe, America, the BRICs, Britain, and the world. It’s about all the things wrong, and all the things right. It’s about a generation of young people who are growing up poorer than their parents, a generation of young people who are not living up to their potential.
This blog is about distilling all the heaps and mounds of bullshit down into a small digestible slice of reality. This blog is about taking the red pill. This blog is about asking difficult questions and taking action.
Is it really that bad?
So where are all the breadlines of the 1930s?
Many politicians (especially those over 50) may say that yes, we had a recession, and yes the world is changing, and it’s harder to get a job. But we have modern economic planning, and quantitative easing, and stimulus packages, and eventually if we just take our medicine and have patience and faith in the system, things will get better. Well, look at the overall employment rate (includes part-time employment):
And look at the employment rate itself:
Does that look like a recovery to you? It looks to me that despite all the spending, and despite all the medicine, employment prospects are getting worse. According to the New York Times†, the U.S. Government has made commitments of $12.2 trillion, and spent $2.5 trillion, and look! The Employment rate is still slumping.
So where are the breadlines?
Found them! The same principle applies in Britain, around Europe and throughout the developed world. Instead of engaging the problem of falling economic participation, the poor are becoming ghettoized and hidden away while governments hope that if they spend enough money guaranteeing debt and supporting big business then the problems of unemployment can be contained.
What is the real problem?
As we can see, corporate profits had no trouble whatever bouncing back from the crash. And unlike the employment rate, they were not in a slump going into the crash. But the problem is not contained to corporations making too much money. The real problem is that governments have been convinced that the health of the economy should be measured primarily by whether or not corporations are doing well.
This means that when governments act, their actions are tailored toward assisting corporations, not assisting individuals or communities.
In my next post in this series, I will go into depth in explaining why and how this is the case, and why this situation is terrible for everyone.
That’s all for now.
Amen… screw TARP and this kind of government supply-side economics. Only when you have a strong middle class do you actually have economic growth. Look at China and India. Right now Western economies are not growing because there’s not enough demand from the middle class.
The rich elite have convinced governments to tend to their needs, rather than the middle-class (i.e. individuals and communities). For all this talk of the rich being job creators, it’s the middle class who the REAL job creators. When the middle-class have a demands for goods and supplies, jobs are created. The working class have jobs, and the rich get richer. Win-win.
Right now Captialism is being destroyed by corporations and governments who have their financial and political power intertwined with each other.
I look forward to hearing more of your thoughts and, more importantly, solutions to these issues. I really do think our financial, societal and political stability could be at stake.
This is why I favour drastically cutting taxes for the bottom 95% and hiking them for the top 5%. My vision is to set the middle class free to be the new class of small-scale venture capital. The overwhelming majority of money owned by the rich goes towards buying government debt, to hedge funds, to leveraged arbitrage, commodity speculation, asset stripping, etc. These activities generate financial wealth, but not real world gains. Look forward to tomorrow’s post:
Why Quantitative Easing Sucks.
Edit: Or “Why this Stimulus sucks” as it turned out.
Arbitrage and speculation in commodities (especially agricultural commodities) produces wealth by making liquid markets in these necessary goods, and smoothing the risks that Nature itself puts in those markets.
But why bother doing that hard work when it is now possible to speculate risk-free that, e.g., the ECB will buy PIIGS sovereign debt? They practically post their buy orders in advance so you don’t even have to think hard to front-run them. Bond speculation in front of these Open Market buyers draws money out of Commodities and into Financials – effectively deflating industrial prices while crashing interest rates
(which balloons the liability side of corporate balance sheets).
If you want to be the new Tax Man, don’t pretend to be setting anybody “Free” – you’re just the latest in a long line of slave drivers who think they know best.
There has already been vast amounts of taxation, and vast amounts of redistribution, and most of this has been from the middle-class taxpayer to the military industrial complex. If you want to pay off the debt, and ultimately reduce the tax burden for everyone, it is only fair that those who have benefited most should foot the greatest bill.
Furthermore, by slashing taxes for the poor and middle, and raising them for the super-rich, you are not taking anybody’s economic liberty: the poor and middle have more money to invest, and the rich still have a huge amount left to invest. this means that the deficit can be reduced while creating an increasingly entrepreneurial and capitalistic society where (ideally) there would eventually be a much lesser amount of taxation and spending required.
It is a fallacy of modern libertarians (and that foolish creature Ayn Rand) that we can go cold turkey from statism to capitalism. The transition must be gentler, otherwise (as we are seeing with Cameron’s austerity program) cities will burn.
Further, I have no problem with arbitrage and commodity speculation:
I have a problem with such activities being subsidised by government fiat, and I think that that is what needs to stop.
I am not really a follower of Mises or Hayek, as much as I am of Adam Smith. And Smith did believe that some taxation and redistribution (through “certain great projects” as he put it) was necessary.
The fact is that taxes could be vastly decreased for everyone in the long run if we ended imperialism and corporate subsidies and redirected spending (even at a lower rate) to things like alternative energy infrastructure, youth job creation, and improved public infrastructure (e.g. “certain great institutions” like NASA).
The problem I have with most libertarians is that their thinking is incredibly utopian, and does not seem particularly concerned with concrete steps toward making this imperfect and imperfectible world of ours freer and more capitalistic.
Of course I agree that gold is the money of Kings, silver the money of gentlemen, barter the money of peasants, and debt the money of slaves. But — just like Ron Paul no longer specifically demands a gold standard, but rather a basket-based money — we all disagree on just how we should transition.
Walking in the presence of an intellectual giant here. Cool thinking all around!
Aziz, I am looking back at your first post from your link of your latest post. You have legendary powers of analysis.
We need a full Trust beneficial ownership investigation of the 1% wealthiest people/families that have ownership of various corporations. Then 100% appropriation!
A lot of these families have accumulated capital power over centuries. This 100% appropriation tax will go a long way to kick starting this stale economy we have.
These “Trust Babies” can use their connections to rebuild their wealth. It will be “Character building”.
I am not talking about Communism, I am talking about a reset of Government debt via public auction or share distribution to the lower middle class AKA the French Revolution minus the beheading.
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Respect to post author, some good information . “If you don’t leap, you’ll never know what it’s like to fly.” by Guy Finley.
Keep functioning ,fantastic job!
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>This means that when governments act, their actions are tailored toward assisting corporations, not assisting individuals or communities.
It is true that “Mercantilism” is the political system in Washington DC and in the
various State capitols. Letting a non-commercial entity like a government take charge of commercial law and impose “economic” regulation will certainly be a destructive influence. But this has only a little to do with unemployment. which arises due to the “Legal Tender” definition of Money, and the changeover of bank reserves from short term commercial paper (discounted bills) to Treasury debt and other long term financial notes. America had corporations and mercantile favoritism long before these were called “Robber Barons”, and yet the term “unemployment rate” wasn’t even an economic statistic! Oh, and yes, even then Chinese labor was much much cheaper than American labor even without Unions.
The phenomenon of massive, synchronized Unemployment really came into existence when the Wage Fund was abolished during and after WWI. What’s that? you ask. It is part and parcel of the “commercial paper” I mentioned above – the Wage Fund arose in the money supply in lockstep with Goods of known marketability being in the production pipeline in known quantities for nearby delivery dates in fulfillment of bona fide merchant orders for said Goods. Those hard economic Facts were the gold standard of risk management: “How Paris Gets Fed“. We know people will eat, stay warm, etc… commercial paper monetizies our certainty about these things in exquisite detail. It does this in direct proportion and dynamic adaptation to the value of goods and services currently trading in the economy (which is why you demand a money supply in the first place). It is out of these liquid bills of exchange that wages are paid weeks or months before the Goods are sold. It is just such a money supply that stabilizes prices (to the extent that that is a desirable goal).
But we don’t form our money from certainties like this any more. Now we use toxic assets as Federal Reserves, and the promises of Congressmen, and many other forms of doubtful debt to back our money, while the real economy’s clout grows more and more diluted and marginalized. If we think we can become a country where financial speculation and government spending are AAA risk-free, but production of goods is high risk, then maybe we have no need for employees or factories, let the 3rd world have them! This is the plain signal sent into the market by Federal Reserve Open Market Operations. Unemployment is a direct consequence of our poor choice for how to define money. We don’t see employment in our economy anymore because we don’t require it to eat our free lunch: we’re eating Cake, don’t bother us with mere Bread!
Your blog could stick with that one question “What is Money?” and answer nearly all of your other burning issues.
I totally agree with your commercial paper discussion. Never thought of of like that, thanks.
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