Tag Archives: economics

The Coming Economic Crash

July 25, 2018

Book Review:

Thomas Hartman, The Crash of 2016. Twelve, the Hachette Book Group, New York, 2013

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If there really had been a crash in 2016, Hartman would have been considered a great genius. As there wasn’t, he ends up with some egg on his face. Further unfortunately for Hartman, some of the problems he points out were already reversed by the Trump administration, specifically tariffs and China-bashing. So his argument for the crash of 2016 is further undermined.

However, a ‘great crash’ within the present time frame would nevertheless redeem him and people would only say that he missed it a few years. The book is a good, exciting, read, but I would have to put it into the category of well-written alarmist narrative rather than serious economic study. Like all of the books written before Piketty (2015 in English) that I have read, they consider 1945-1979 “normal” and everything subsequent as “abnormal.’ I consider this wrong, and so does Piketty. The abnormal period was 1945-1979. Before and after that short “American century,” what happened and is happening is just capitalism.

Hartman puts most of the fault for the disastrous 1979-to-present period on mental states and subjective attitudes rather than historical and economic developments. FDR was a good guy, the “economic royalists” were bad guys with questionable sanity. In fact he calls them psychopaths. The rest of us are guilty of mental lapses, too, as new generations go through a “great forgetting” that causes us to repeat previous economic errors.

As Hartman doesn’t understand the cause of the present economic problems, he doesn’t have a very good handle on solutions, either. Some of his hopes are presently being carried out by Donald J. Trump and are not likely to bring long-term economic benefit to the populace. He also proposes things that aren’t likely to happen given current trends. After the “crash of 2016” that he predicts, he wants us to reinvigorate democracy through election reform. He wants the labor movement to be encouraged by government. Most of all, he seems to want worker cooperatives to replace the giant corporations as the main economic engines.

How any of that could happen, Hartman doesn’t say.

some notes:

Pg15: Good quote from Grover Cleveland in 1888: “The gulf between employers and the employed is constantly widening, and classes are rapidly forming, one comprising the very rich and powerful, while in another are found the toiling poor. As we view the achievements of aggregate capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.”

20: The Business plot: General Smedley Butler blew the whistle on a plot to bring an army of 500,000 men into DC to oust FDR. The front man for the businessmen and banksters was Gerald MacGuire.

26: Moyers quote on plutocracy on 2011: “Our democracy is dysfunctional…. We no longer have a government of, by, and for the people– representative democracy. We have government by plutocracy– the rule of the rich for the rich by the rich…. Plutocracy has one purpose, which is to protect wealth.”

Pg34: Powell memo outlined how Republicans could take over. Lewis F Powell Jr in 1971 went to Nixon. Nixon made him Supreme Court Justice. His memo, written to the United States Chamber of Commerce just before his nomination, recommended a militant political action program ranging from the courts to the campuses. He wanted to undo the New Deal. Powell called on corporate leaders to launch an economic and ideological assault on college and high school campuses, the media, the courts, and Capitol Hill. The objective was simple: the revival of the Royalist-controlled so-called ‘free market’ system. (page 37)

pg40 Roger Ailes prepared the way for Fox news misrepresentation

pg43: lobbying mushroomed. ALEC formed

44: CATO and Heritage foundation come out of Koch Brothers

48: Supreme Court decisions such as Citizens United

52: “Trickle down” economist Milton Friedman advises the fascists in Chile. Terrible economic results

71: He credits FDR and “good “ politics for 1945-1979 good times. Unlike Piketty, who says it was the “shocks” of two world wars.

88: He is pro-tariffs. This is before Trump imposed them

93: Psychopaths. He says that banksters and other filthy rich are basically psychopaths. In fact, a lot of Hartman’s analysis has to do with mental states. He thinks that generations go through a “great forgetting,” for example, that causes us to repeat previous economic errors.

95: Getting sillier. He thinks madness is part of evolution.

96-7: Oligopoly

101: On China, he seems to be agreeing with Trump again. Lots of China bashing here

122: Tillman Act under Theodore Roosevelt stopped corporate electioneering

151: Corporations, especially Railroad Corporations, made many efforts to get legalization in Supreme Court decisions. They always lost until “Citizens United.”

207: He gives recommendations for after the crash of 2016. It’s all reformism of capitalism. He espouses value of co-operatives.

273: Author is described as a talk show host with several important books before this one.

–Gene Lantz

I’m on the “Workers Beat” talk show on radio KNON in Dallas at 9 AM Central Time every Saturday. Podcasts are available under the “events” tab. If you are curious about what I really think, check out my personal web site.

When The Economy Began Failing

June 11, 2018

economy, history, politics

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Book Review:

Levinson, Marc, “An Extraordinary Time. The End of the Postwar Boom and the Return of the Ordinary Economy.” Basic Books, New York, 2016. Dallas Public Library 330.9045 L665E

keynes-quot-inflation

The unusual economic period was the third quarter of the 20^th century, also known as the Post War Boom, or the Golden Era. That’s when many people made good livings and some made fortunes. The “ordinary economy” in the title is what we have now – basic capitalism where some still make great fortunes but everybody else is struggling.

He takes an international approach. He points to a few national economies that did OK while the majority foundered, but mostly he shows the similar problems that the wealthy nations suffered after 1973. His point of departure was the oil crisis, but it might just as well have been the failure of the Bretton Woods international financial agreement 1945-1973.

I particularly enjoyed the way Levinson deflated the claims of various schemes of government intervention. He quotes figures to show that none of the much-vaunted “new” approaches actually did much to help after 1973. Reaganism was just as big a bust as any other “new” theory. Actually, they weren’t even new.

His international approach is far superior to what we usually read in American newspapers and political campaign advertisements. They only talk about what happened in America without regard for world changes. His way is better. For example, suppose an economist said that a certain new technology should have greatly improved manufacturing production in America. Maybe the reason it didn’t is because some other country did it better or cheaper. That’s pretty much what actually happened to American manufacturing, not some mistaken priorities within our own economy.

What limits this economics book is its commitment to capitalism. He dispenses with the Soviet Union’s economic travails in two pages. The rest is about the major capitalist economies. Nowhere in the book could one even ask the essential question of economics, “If we can produce enough for everybody, then why isn’t everybody doing OK?”

The set of statistics most critical for Levinson is those on productivity. He says that the Golden Age was golden because of high productivity in the wealthy nations. The crisis that began in 1973 and continues now was marked by substantially lower productivity. If productivity could be restored to high levels, everything would be just fine, according to Levinson. At the same time, he offers no suggestion as to how that could be done.

You might as well say, and I think Levinson does say, in so many words, “The Golden Age was just a fluke. Misery is the norm.” I recommend this book for its open-minded analysis and despite its conclusions.

–Gene Lantz

I’m still on KNON radio 89.3FM in Dallas at 9 Central Time every Saturday. Podcasts can be found under the “events” tab. If you are curious about what I really think, check out my personal web site.

The Market

February 6, 2018

economy

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World stock markets nosedived for a fourth day running on Tuesday, having seen $4 trillion wiped off from what just eight days ago had been record high values.

–NBC News

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Just the week before, Oxfam America announced their analysis of all the world’s wealth created in 2017. Eighty-seven percent of it went to the upper 1%!

I’m wondering if that same wealthy 1% took 87% of the $4 trillion loss?

Probably not. The investors that took a bath this week aren’t the pros. They aren’t the ones with computers and experts doing their trading for them. They wouldn’t even know how to “sell short” like the big-time investors who are making fortunes from the downturn.

Once, before the implosion, I visited Moscow. They had a lot of fine museums made from the palatial buildings created in tsarist days. One of them had been the stock market. The Soviets, I was told, were running their economy without a stock market.

The Chinese, I understand, do have a stock market. It’s careening downward as this is written, just as other markets are around the world. The purpose of a stock market is to facilitate the flow of capital. Unfortunately, it also provides a giant gambling den where professional sharks swallow their competitors.

I’ve listened to several experts talk about the present downturn, and they are unanimous in saying that it’s just a correction and does not really reflect the basic world economy, which is sound. It seems to me that they nearly always say that during sharp downturns, because they don’t want investor panic to add to the problem, and they are nearly always right. But not always.

The experts go on to say that the selloff began when statistics were revealed showing that workers were beginning to get paid a tiny bit more. Wages, they said, were rising at the 3% rate. That’s a little bit more than inflation so, though tiny, it’s on the positive side for workers.

Why is good news for workers such bad news for capitalists?

–Gene Lantz

I’m still on KNON radio 89.3 FM in Dallas at 9 AM Central Time every Saturday. If you want to know what I really think, check out my personal web site

Democracy Ebbs, Facism Inches In

April 12, 2017

civil rights, economy, history, politics, strategy

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Germans embraced the Nazis, not because they were tired of freedom, but because they believed they had found a cure for capitalism.

doctorposter-capitalism

From the time it began to take over the world, mid 17th century, until the late 19th century, capitalism provided a better life for its subjects. That is, it was better than serfdom. Serfs were landless farm workers, one step above slaves, who had to take whatever their lords dished out. “Free” labor could leave one employer for another and, to some extent, dicker over conditions of employment.

Capitalism Works Best With Limited Democracy

If workers believe they have a voice in government, they don’t have to be guarded, guided, and pushed to do everything. They don’t run away or deliberately smash the equipment, the way slaves or serfs might. They can be educated for the higher forms of labor that capitalism needs. Consequently, the more successful capitalist economic systems use a limited democracy form of government.

From the beginning of the Republic until after World War II, American struggles made good improvements in our democracy.

What Went Wrong, When Did It Go Wrong?

Capitalism stopped benefiting workers after it conquered the world. When there were no new markets, the capitalists had to turn against one another to fight for the markets they had already saturated. That’s not what they called it. They called it “The war to save democracy,” and “The war to end all wars.”

But WW I was really a bloody turf war between gangsters. For a short period, the winners enjoyed their spoils, but it didn’t last very long because the basic problem of saturated markets and international competition was still there.

So, they decided to have another world war. This one was complicated for workers, because the Soviet Union, try as they might, couldn’t stay out of it. After they began to fight the invading Nazis, they were incorporated into the same side the United States was on. The U.S. ended the alliance as soon as the Nazis were defeated, of course.

No More World Wars

After the U.S. nuked Japan, actually, after the Soviets and other nations showed that they could do the same thing, world wars lost their appeal as a temporary solution to the capitalist crisis. Even the gangster capitalists weren’t crazy enough to blow up their only planet. So, since the late 1970s, capitalist nations have gotten by on small regional wars, lowering their production costs by attacking their workers, and carrying a whole lot of debt. I recently read, in an investment newsletter, that all growth in the United States since 1980 basically came from debt!

Did the Nazis Solve the Capitalist Crisis?

To Germans between, say, 1933 and 1939, it appeared that fascism was the right way to go. Unemployment dived from 25% into low numbers. Lots of infrastructure was rebuilt. National pride was soaring.

But they had only changed their form of government from limited democracy to fascism, they hadn’t changed their economic system. It was still capitalist and it was still in crisis. The only real way toward a temporary solution was war. Even then, as long as they were winning, fascism still seemed pretty good to the Germans. After that, not so much.

What Looks Good to You Right Now?

To a lot of Americans, the Trump Administration and Republican political domination look pretty good. They think there will be more and better jobs. They think they’ll be making a better living and that the steady abatement of basic democracy isn’t too high a price to pay.

But we are still living in an economic system that has provided all the good it is going to provide, and things are only going to get worse if we can’t save and expand our democracy.

Why No Inflation?

September 2, 2016

economy, politics

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Why has inflation been so low in the past few years?

money

If interest rates are near zero, and they have been for some years, doesn’t that mean that corporations can borrow pretty much all the money they want? Since the lenders only keep a small “reserve” of what they lend, wouldn’t all this borrowing result in a big increase in the total supply of money?

If we have more or less the same things to buy, and there’s a lot more money floating around, wouldn’t that mean high inflation?

The Money Supply Is Increasing

The Federal Reserve publishes their estimate of the total amount of money in the U.S. They call it “M2” and it includes everything, bank accounts as well as currency. In July of 2011 it was $9,232.6 trillion, or $9,232,600,000,000. At the end of June 2013, it was $10598.4 trillion. That’s an increase of $1,365.8 trillion in 2 years. I didn’t pick the years, they were just the first ones I found. Probably, the money supply increased a lot more in the 2007-2009 recession period, so the change would be even more dramatic than this recent 15% increase.

That’s Monetary Policy

The operations of the federal reserve are usually made to sound pretty dark and unfathomable, but essentially all they do is increase the money supply in hard times. They have a number of ways to do it, but it’s still just about all they do. I don’t think they can even constrict the money supply — they can just make it grow faster or slower.

Fiscal policy is actually a lot more important. That’s government spending. If the people running the American government had really wanted to get out of the 2006 recession quickly, they would have turned on the spigots of government spending. They didn’t because they didn’t want to. That left the entire problem up to the Federal Reserve and the expansion of the money supply. They fell to their task mightily.

They lowered interest rates to near zero so that businesses could basically get all the money they might want. They started “buying” treasury bonds with money they basically manufactured. Trillions of dollars went into the economy and the goods and services didn’t actually change that much. If something was worth $10 when there were $5 trillion in the economy, it makes sense that its price would inflate to $20 when the money supply doubled. But it didn’t.

So, why no inflation?

Money Has to Move

The velocity of money is how fast it moves through the economy. If it doesn’t move through the economy, it has practically no effect on prices. If the government gives trillions of dollars to fat cats who just sit on it, store it in overseas accounts, or just use it to buy back their own stock, which is what they did, prices don’t change much.

If the government had fought the recession with fiscal policy, inflation would likely have been more of a problem. If the government had hired some of the many unemployed to fix some of the infrastructure, teach the children, or prepare for the future, the new money would have gone into wages — and those wages would have been quickly spent. More money and more velocity at the same time would have resolved the recession more quickly, but there would have been more inflation.

So, the short answer to “why no inflation?” is that the new trillions of dollars went to very wealthy people who just kept it.

Why is Economics so Dark and Illogical?

In olden days, a “philosopher” was someone who generalized from a great deal of knowledge. Today, we divide up all knowledge into various “disciplines” with geniuses in one field completely ignorant of any other field. We divided politics from economics for Heaven knows what reason, and neither one of them makes any sense without the other. The Polysci grads don’t know beans about economics and the Econ grads don’t know politics.

The Polysci profs snow everybody with statistics because they don’t really want anybody to know their arcane secrets. The Econ profs do the same thing. My friend Jorge Rieger compared them to the secretive priests of old, and it’s a pretty good comparison. If you’re interested in a simpler explanation of economics, click here for the Little School.

–Gene Lantz

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It’s Just Capitalism

August 22, 2016

elections, history, politics, strategy, unions

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For weeks now, I’ve been raving about “Raging Inequality” by Les Leopold. Not so much because it’s a great book, which it is, but because the powerful Communications Workers of America (CWA) union is promoting it, teaching classes, and giving away copies. But I’ve been holding something back.

abevigoda

In essence, the book uses economic data and graphs to show how rotten things have been in America since 1980 in contrast to the period 1945-1980. Then it goes on to suggest how we can return fairness to our nation.

What’s wrong with that?

We’re looking at the wrong end of the graphs. The right side of each graph, the period 1980-2016, isn’t the period that’s out of kilter. It’s 1945-1980, the left side of each graph, that was un-historical. That “American century” of 35 years was downright peculiar in the entire 400-year old history of capitalism. It was the only time in history when the working class of any capitalist country ever held its own against the bosses! All the other periods, including the present one, were just business as usual.

Business as usual means constantly increasing the exploitation of the workers. It’s not anybody’s fault, it’s just the only way that capitalism can work. The only thing that can even slow the process down is resistance from the working class.

The post war period in America began with over 1/3 of all American workers in unions. There were more successful strikes in 1946 than in any year before or since. The unions, especially those led by the Congress of Industrial Organizations (CIO), were integrated, practicing solidarity with one another and with the community at large, and even internationalist in their outlook! They were a real force to be reckoned with, and their power took decades to dwindle down to the skeleton that the new progressive AFL-CIO leadership picked up in 1995.

Shouldn’t we be fighting?

Of course we should be fighting every day. That’s why I tout the book so much. It shows where we are now and some of the steps we could make that would take us forward. My objection to it is that we don’t really want to return to 1945-1980, nor can we. We must bear in mind that we are fighting for something entirely new: an end to boss rule.

Until then, every advance that working people make can be taken away, because the bosses are still in power.

Read the book, please!

Let’s do our best to expand this marvelous educational project that the Communications Workers have begun. Let’s read the book and get everyone else to read it.

–Gene Lantz

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