Finally got around to addressing this in tonight’s Darkstream. Hit 13 of Henry Hazlitt’s 23 errors on free trade, which longtime readers already know. I also slapped down a Nazi larper who suggested “national socialism” as an alternative to free trade; one of these days I’m going to have to do an analysis of the Nazi economic program to make the absurdity of it clear to those who can’t move beyond the binary world of “communism bad, ergo expansionary Teutonic supremacy good.”
Tag: economics
Adieu, Paris
Trump rejects “another scheme to redistribute wealth out of America” in pulling out of the 2015 Paris Accord on unicorns.
I mean, “climate change”.
“Our withdrawal from the agreement represents a restoration of America’s sovereignty.”
Darkstream: why Communism is better than free markets
This one should amuse the VFM. I sort of lost my patience with the midwits and binary thinkers who think that the correct way to respond to someone saying something original is to quote conventional boilerplate of the sort that anyone who is even half-educated already knows. Anyhow, it should also interest those of an economic bent, as in the course of explaining the observation that Communism is better for a nation in the long-term than liberal democratic capitalism, (the what, if you will) I was able to explain the economic reasons why that always had to be the case.
This doesn’t mean that socialism isn’t economically retarded; it is. But it is that very retardation that tends to protect a nation from the ravages of the global free markets. And if you’re tempted to respond that the global markets aren’t truly free, well, watch the Darkstream first.
It might help to remember the fact that X being better than Y does not mean that X is either good or desirable in itself.
They’ve got nothing
Literally nothing. And they know it now too:
The spell worked its magic for three decades. For three decades humanity believed in the blessings that globalization would bring in its wake. It was assumed that in the end everyone involved will benefit when we remove regulations, when corporations become ubiquitous throughout the world, when the banks have lots of money, when tax havens exist, and of course when government stays out of our hair. What prevailed was the primacy of the economy, whether in Herne, New York or Shenyang. It was as simple as that.
But times have changed. Once considered to be the High Temple of market dogma, the mighty financial world was about to collapse ten years ago, before it had to be rescued by – surprise – the rest of us.
What also collapsed was the myth that markets can regulate themselves. Simmering unrest emerged, borne by diffuse fears, half-knowledge and justifiable rejection of what has gone wrong with globalization. It became an opportune time for con men and authoritarians.
We now see a void that cannot be remedied by trying to fix details. What the world needs instead is a new leitmotif, a new guiding concept. We indeed need it before populists of all stripes fill this void by inciting people against each other. Time is of the essence….
The greatest promise has remained unfulfilled: Half of the Americans today have seen stagnating or even significantly lower real incomes since 1989. In Germany, there are 40 percent who are less well-off in real terms, and half of Germans possess practically no wealth. And nearly one in four Germans works for little pay. Such enormous wealth gaps between the rich and the poor existed in the nineteenth century as well.
Depending on the calculation, progress has thus by-passed a third to half of the population. The Americans and Britons were the first to be jolted by this development through the election victories of Trump and Brexit. Ironically it is those very countries who most eagerly followed the mantra of the free markets that are now confronted with Industry 0.0 and social division. Meanwhile, IMF experts are having to concede that capital markets are probably not so efficient after all. And the once orthodox-liberal OECD is only defining growth these days as good growth if it benefits the poor.
The myth of the past has become passé. What is missing is the new, powerful concept…. What we need to find is a unifying formula to define the new paradigm: the leitmotif.
Finding it is a tremendous challenge. It cannot be as simple as the market-works-wonders formula. Yet it must be simple enough to make it plausible to everyone. The solution probably lies somewhere in the middle: in a better controlled, enlightened globalization that can do without the compulsion to standardize everything throughout the world. What is needed is a new balance of liberties with built-in safeguards against excesses. And an environment in which politicians can again shape and decide on policies instead of rescuing banks or states without having much choice in the matter.
The great irony is that the author quite clearly doesn’t realize that “the myth of the past” was a con all along, and what he’s begging for is a new and improved con from the same set of con artists.
Economists still puzzled by 2008
Robert Schiller, who chronicled the rise of housing prices that led up to the 2008 crisis, still can’t figure out why it happened. Neither, apparently, can any of his fellow economists.
There is still no consensus on why the last housing boom and bust happened. That is troubling, because that violent housing cycle helped to produce the Great Recession and financial crisis of 2007 to 2009. We need to understand it all if we are going to be able to avoid ordeals like that in the future. But the explanations for what happened in housing are not, I think, to be found in the conventional data favored by economists but rather in sociologically important narratives — like tales of getting rich through “flipping” houses and shares of initial public offerings — that constitute the shifting mentality of the era.
Strange, that the professional economists can’t determine the cause 7 years after it happened, and 15 years after I warned that it was going to happen. As those who have Collected Columns Vol. 1, Innocence & Intellect know, I wrote the following in 2002:
There can be little doubt that the implosion of the equity markets will soon be followed by the pricking of the credit and real estate bubbles. As great financial houses such as Citigroup and JP Morgan Chase teeter on the edge of bankruptcy, it is well within the realm of possibility that the triple whammy of the equity, credit and real estate implosions will lead to the collapse of the entire global financial system.
Complete collapse of the system was staved off by the bank bailouts combined with the easiest monetary policy in human history. But the system was not fixed. Far from it. The new stock market highs we are seeing today are not the result of a strong economy, but rather, a perilously fragile one that is subject to the very same catastrophic failure that was narrowly averted in 2008.
Darkstream: ignore the title
I’m almost impressed with the complete disconnect between the title of tonight’s Darkstream and the actual content. On the plus side, there is some dirty economics talk, for those of you who like that sort of thing.
And the term that escaped me was Giffen good, for the record.
Ce ne sont pas l’économie
The global elite will fall in the end. The global elite can claim that l’économie est nous all they want, but it isn’t and it never has been.
The world is run by an international elite that lives in a rarified world of seemingly boundless power and luxury. Though the members of this elite consider their own power and luxury to be completely legitimate, it is not. It is the product of a system that’s rigged to benefit them while everybody else languishes in declining small cities and provincial towns, eking out a dreary existence, toiling away their lives in menial service-sector jobs or scraping by on disability checks while seeking out a modicum of fleeting joy in the dumbstruck haze of a painkiller high.
Unless something fundamental changes, the gap separating these worlds will only increase, economically, culturally, and psychologically. Republicans show every sign of continuing to pursue policies that actively make the economic problems worse. Centrist Democrats, meanwhile, appear to be both unwilling to propose a sweeping critique of the outlook and policies that got us to this point in the first place and inclined to dismiss the populist anger building all around us as an expression of atavistic prejudice.
This cannot last. At this rate, make no mistake: The global elite will fall.
Their parasite economy of finance-based ownership of real world property and produce rests entirely upon the false claims it generates upon the real economy. And all it takes to destroy the parasite economy is the mass refusal to recognize its claims, many of which are already known to be completely fictitious. See: the mortgage title scandal of 2008 onwards.
The parasite economy is already killing its host. It is like a drunken vampire who is too intoxicated to stop draining his victim. And once the host collapses, its component parts will turn on the parasites with a vengeance.
This isn’t a failure of capitalism, this is a tripartite failure of usury, fraud, and fundamental morality. The Alt-Right Revolution cometh.
She did the math
Nice to see that women are capable of grasping that feminism is bad for more women than it benefits economically:
Author Fay Weldon has risked infuriating fellow feminists by claiming their cause left two-thirds of British women worse off. In an interview in The Mail on Sunday’s Event magazine today, Weldon, 85, says the feminist revolution had adverse implications by ‘halving the male wage, so it no longer supported a family.’ That meant some women had to get jobs, even if they would rather have been at home with their children. ‘Women had to work to support the family. So for two in three women, it really was a problem.’
I first pointed this out back in 2007:
Anyhow, it’s interesting that people are finally beginning to pay some attention to the basic economics of the issue. I expect more than a few people on both sides of the feminist aisle are going to be very upset when the period from 1970 to the present is studied.
Feminists will be upset because it will make feminism look like a disaster for women. Working, married non-feminists will be upset because they’ll realize that they are essentially working for nothing. Men won’t like it either, since they’ll realize that they’re getting paid less for the same work that their fathers did.
It’s interesting how everyone understands that immigrants cause labor prices to fall, but most people don’t grasp that a substantial increase in domestic work force participation, by any group, has the same effect.
For the benefit of those who needed me to type more slowly, I spelled it out in more detail in 2013:
While immigration too plays a role here, the only significant effect native women have when they enter the labor force in greater numbers is to depress the price of labor. Unlike immigrants, they don’t bring in new consumption to help mitigate their wage-depressing effects; the reason real hourly wages peaked in 1973 and have been falling ever since is because that was the year that the number of men younger than 20 and older than 65 leaving the labor force was surpassed by educated, middle-class women entering it.
One-third of working class women have always worked. The change brought by feminism is that now middle class and upper middle class married women work as well. And the more women that work, the more women have to work and the less time women who don’t work will have with their husbands who support them, because an INCREASE in the SUPPLY of labor necessitates a DECREASE in the PRICE of labor, demand remaining constant.
And to make matters worse, demand does not remain constant, but actually declines, because a woman who works is statistically much less likely to eventually become a wife and mother, and even when she does, she becomes one several years later and has fewer children. This means that feminism is a structural economic failure as it creates a downward-spiraling vicious circle of three easily identifiable revolutions:
- The increase in the supply of labor causes wages to go down. This is indisputable in either logical or empirical terms.
- Female hypergamy, female independence, and opportunity cost reduces the marriage rate and the average birth rate, while increased male work hours and work-related romantic opportunities increases the divorce rate. These connections are all logically sound and readily observable.
- The reduced birth rate has a negative effect on consumption, and therefore the demand for labor, 20 years before the consequent negative effects on the supply of labor can help balance it out, putting further negative pressure on wage rates. This is also indisputable, both logically and empirically.
Mailvox: in feeble defense of Keynes
I don’t think Art Deco quite understands where he is.
What’s the point of slamming Keynes? Keynes is notable as a progenitor of a nexus of macroeconomic models. Macroeconomics has some trouble settling on a consensus model. It’s neither necessary nor proper to attack his integrity.
First, Art Deco is wrong. Second, he is WAY out of his league here. Keynes had zero integrity – he claimed to have abandoned his theory of money in between its publication and the published rebuttal by FA von Hayek in order to avoid having to answer the latter – he was incredibly intellectually dishonest, and his General Theory was little more than rehashed Freudian nonsense dressed up in math-sounding economics.
The only reason it became popular is because it gave politicians an excuse to do what they wanted – spend money.
Socialism still doesn’t work
One of the many reasons I am so skeptical of “self-correcting” science is that humans quite observably learn absolutely nothing from history, even when logic, theory, evidence, and experience all line up conclusively in harmony:
Facing a bread shortage that is spawning massive lines and souring the national mood, the Venezuelan government is responding this week by detaining bakers and seizing establishments.
In a press release, the National Superintendent for the Defense of Socioeconomic Rights said it had charged four people and temporarily seized two bakeries as the socialist administration accused bakers of being part of a broad “economic war” aimed at destabilizing the country.
In a statement, the government said the bakers had been selling underweight bread and were using price-regulated flour to illegally make specialty items, like sweet rolls and croissants.
The government said bakeries are only allowed to produce French bread and white loaves, or pan canilla, with government-imported flour. However, in a tweet on Thursday, price control czar William Contreras said only 90 percent of baked goods had to be price-controlled products.
We shouldn’t be too contemptuous of the Venezuelans, though. They fell for socialism. We fell for feminism and civic nationalism. All three concepts are equally stupid, as all three fly completely in the face of our current understanding of the relevant sciences as well as thousands of years of written human history.