Modern Capitalism In a Nutshell

I don’t understand all the fuss about the new President-Elect who refuses to relinquish personal control over his corporate empire. Critics call it a “conflict of interest.” This shows a basic lack of understanding of the finer points of “evolved” modern capitalism.

  • You can’t make money off of other people’s money. They have to consent to give it to you.
  • If they won’t give it to you, con them out of it.
  • If they won’t be conned, pass laws so you can legally just take it from them.

There are corporate exceptions, of course. They stand out like shining beacons on a rocky, stormy shore.

What happened?

Modern “Capitalism” scarcely resembles that “laissez-faire” Capitalism originally envisioned by Adam Smith and early followers, who saw value as the product of labor, not money and influence. They saw economic prosperity as the result of free trade within the same fabric of existing laws and courts that we live under, not as an end-run around them. Most of those pioneer economists would undoubtedly have been horrified to see what we have done in their name.

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Happy Fiscal Cliff New Year

Happy New Year. It’s a bit early to pat ourselves on the back for the midnight Senate compromise bill. We have yet to reckon with the real hurdle, Boehner’s House.

The American people are deeply divided along party lines on fiscal priorities. No president is going to “negotiate” these differences away. Like the market collapse after the 2008 meltdown, no one knows how seriously the world economy would have been impacted if the US had simply defaulted to the recession option.  It is arrogant to say that Obama “caved,” because it’s arrogant to elevate the “winning” mantra over fiscal responsibility.

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The Economy and The Dam

CATASTROPHE: To the right of the steep Interstate 5 grade that takes us out of the Los Angeles basin and over the Sierra Pelona Mountains of northwestern Los Angeles County, toward Gorman Pass, looms a massive concrete and earthen dam high above the freeway. When traffic slows up the grade, I often get the creeps pondering the fact we are all sitting ducks here. If this dam forming Castaic Lake were ever to burst, there is no place to turn around and flee, no place to go, and we and everything around and below us would all be swept away by a wall of water nearly 200 feet high. Of course the communities below would be wiped out.

They would build a new dam, and they would wait for it to fill up.

But as it turns out, this already happened before.

In 1928, one year before the 1929 Great Depression, the old St. Francis Dam failed catastrophically, killing 600 people in the flood.

When an economy breaks completely as it did in 2008, there are only a few things the government can do to stimulate demand, promote hiring, and get businesses going again. It is a slow process. And most of those things are against the political philosophy of half of the country, anyway. Like that new dam filling with water, there is just so much engineers and hydrologists can do to increase the flow of the water that fills the dam. You can dredge the feeder creek.  You can try to remove obstacles to smooth water flow. There’s no magic wand to boost the flow of water that gradually refills the dam. Most of it is up to processes that occur naturally. An economy works the same way.

But you can bet the folks in the wealthy homes high above the dam were anxious to see their Lake Castaic Reservoir refilled. “Make the river flow faster!” they’d have shouted. “Make it rain!” And they’d vote for the magician who promises he can wave his magic wand and make all that unpleasantness go away.

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Milton Friedman Then and Now

Here’s a comment I posted to Huffington Post, commemorating the 100th anniversary of the birth of economist Milton Friedman …

The Chicago School of Economics was always conservative. More than any other economist, Milton Friedman made it synonymous with ultraconservative. Friedman was a brilliant advocate of free-market economics, but he was no ideologue. With elimination of controls, laissez-faire thinkers like Friedman (and Greenspan) envisioned increased competition, a healthy business and social environment, more jobs, a higher standard of living, and lower prices. That was the theory.

What we got was “too big to fail” mega-mergers, corrupt business practice, decreased competition, layoffs and mortgage defaults, a thrust-fault slippage of the standard of living, higher prices, and the biggest global economic catastrophe since 1929. As a consolation prize, we got Citizens United to remind us what a monumental achievement this was.

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Who’s To Blame?

Mini-ed (from my recent Huffington Post comment):

The collapse was a two-decade bipartisan collaborative effort in partnership with private enterprise. The root of the collapse of the economy and average family wealth also goes, causally but perhaps coincidentally, back to 1992, the year to which family net worth was reset. That was also the year the real estate bubble really started to take off. We all said, “this can’t last.” Remember?

On paper, homeowners were worth more. Republicans and Democrats alike clapped and cheered. Relaxed and ultimately crazy lending requirements fueled a genuine American Tulip Mania. The whole economy became dependent on future growth for today’s prosperity. ARM’s, derivative speculation and toxic assets were the icing on the cake.

The $1.3 trillion war debt would certainly have helped our recovery effort. Once again, a divided America supported that effort on both sides of the aisle.

It’s time to stop the finger-pointing, roll up our shirtsleeves, and work together to fix this thing. That may require political compromise, something we used to be good at. The only thing that’s stopping us is ourselves.

 

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End of Space Shuttle Era

It’s the end of a glamorous and inspiring era, all right. As the last Shuttles are piggybacked to final repose in public museums and display monuments, there’s been much talk-TV hand-wringing from all ends of the political spectrum. Many of us wistfully wish that the Shuttle could have been deployed longer, that a re-usable NASA solution could have been deployed before the old one was retired, and that we hadn’t scrubbed the next BIG frontier – a manned Mars mission.

There will be time for this. Look at how much we’ve accomplished – and discovered – since Apollo 11. The simple truth: we already spent that money. It’s estimated that our total war cost in Afghanistan, Iraq and Pakistan will cap out at over $3.7 trillion. [Reuters]

Click the above image for NASA’s choice of full-size images of this scene.

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“Repairing the Social Safety Net”

The New Yorker’s James Surowiecki, in “Call That A Budget?” commenting on the part of Paul Ryan’s draconian Tea Party budget proposal ingenuously called “Repairing the Social Safety Net” :

But when Ryan explains that he’s doing things like cutting Medicaid in order to help “the less fortunate get back on their feet” one hears echoes of Judge Smails, in “Caddyshack,” explaining that he sentenced young criminals to death because “I felt I owed it to them.”

Read more: http://www.newyorker.com/talk/financial/2012/04/09/120409ta_talk_surowiecki#ixzz1quFHGwGJ

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