By Francis Lee for the Saker blog
‘’The best-known definition of financialization is that it involves the increasing role of financial motives, financial markets, financial actors, and financial institutions in the operation of domestic and international economies.’’ (1)
In this dungeon – All that glitters is gold. Bank of England Gold Vault
The massive shift in the global system of industry and finance which had been based upon the Bretton Woods institutions – viz., the IMF (International Monetary Fund) the World Bank (previously known as the International Bank for Reconstruction and Development and the International Development Agency) which carried on regardless at the ending of the gold standard in 1971. Both the World Bank and IMF were based in Washington. Additionally, another Bretton Woods Institution – The General Agreement on Tariffs and Trade, was to become the World Trade Organization (WTO) in January 1995.
It was generally understood by all the actors that the objective was for firms to engage in the economy in order to produce goods and services with a view to further investment, growth, and profitability. This was the consensus of the time and raison d’etre of capitalism. However, this political unanimity began to change, quite fundamentally.
The massive shift as mentioned above was a step toward delinking the US$ with gold, when the US government guaranteed to exchange US$ for gold at the fixed rate of $35 per ounce. This effectively placed all the world’s currencies onto a gold standard backed by the US gold at Fort Knox. Many governments came to accept US$ as gold deposit certificates and chose to hold their international foreign exchange reserves in dollars rather than in gold.
The system worked reasonably well for more than 20 years until it became widely evident that the United States was creating far more dollars to finance its heavy military operations, firstly in Korea and then Indochina, and this combined with the domestic social spending which were part of Johnson’s Democratic party enmeshed in the ‘Great Society’ monetary splurge. What happened next was entirely predictable. Overseas holders of US$ began to take their dollars to the Fed’s bank window, but the Fed could not give them anything in return other than US Treasuries which are just a form of paper money! It was a French politician, Valery Giscard D’Estaing, who drew attention to this American ‘exorbitant privilege’. Pretty soon all the gold was beginning to fly out of Fort Knox to Europe and the Far East. The US government had to do something in order to stem the outward flow. On August 15, 1971, President Richard Nixon declared that the US would no longer redeem dollars on demand for gold. The dollar was ultimately nothing other than a piece of high-grade paper with a number and some intricate artwork issued by the US government. The world’s currencies were no longer linked to anything of real value and shared expectations that others would accept them in exchange for real goods and services.
It was a fantastic (and lucky) stroke for the Americans to pull this off. But this financial coup seemed like the opening shot in a long goodbye to the existing economic and political order. A strange thing was happening indeed. In the words of the Irish poet, W.B.Yeats, ‘All changed, changed utterly. A terrible beauty is born.’ From the poem, ‘Easter 1916.’
A Terrible Beauty
Capitalism was clearly morphing into a different animal with a new financial-economic structure which emerged from the old-style capitalist mode; the old order of production and consumption in a traditional capitalist economy which was occasioned by the production of tangible wealth, as opposed extractive or more tangibly extracted ‘wealth’. Businesses once focused almost exclusively on producing the goods and services for which they had a competitive advantage, but in the economic conditions of the present time they became likely as much if not focused more on their share price, their dividends regime, and in addition, to their interest rates.
A new class and a new system were clearly emerging, if not actually fully emerged. At the present time a tiny minority of people and corporate interests across the world are accumulating vast wealth and power from rental income not only from housing and land but from a range of other assets natural and created. Rentiers of all kinds are an unparalleled ascendancy, and the neo-liberal state is only too keen to oblige their greed.
The rentier class derive their income from ownership or control of assets that are scarce or artificially made scarce. Most familiar is rental income from land, property, mineral exploitation, or financial investments, but other sources have grown, pari passu. These include the income lenders again from debt interest; income from ownership of ‘intellectual property’ (patents, copyrights, brands, and trademarks); capital gains from investments, ‘above normal’ company profits (when a firm has a dominant market position that allows it to charge higher prices or dictate terms); income from government subsidies; and income from financial and other intermediaries derived from third party transactions. A political and economic structure began to emerge in the 1980’s. Once more quoting Yeats, ‘All has changed, changed utterly. A Terrible beauty is born.’ That terrible beauty is Neoliberalism. (2)
‘’Today’s corporations have become thoroughly financialized, with some looking more like banks than productive enterprises. This financialization of non-financial corporations has involved the transfer of societies resources from the employees to the share/stock’s shareholders. This transfer of wealth has resulted both from changes in the political and economic foundations of the global economy from the rise of a new ideology, which holds that corporations sole aim should be to maximize profitability via increasing returns to shareholders. Both ideas and power relations have to change to create any lasting economic change – and the 1980s was a period of transition of both.’’ (3)
Yes, those old enough of us who can remember the 1980s, a strange period of counter-revolution and – die Zeitgeist – yuppies, private equity, Thatcher and Reagan, The Big Bang, The Eurodollar market, Milton Friedman, and the Chicago School of Economics, ‘Greed is Good.’ Privatisation was all the rage. Heady stuff, but like all similar periods of ersatz golden ages the recent versions have crashed into the truths of economic realities. Like, you don’t get something for nothing, or booms lead to busts, or asset price inflation is not the same as growth. In order however … ‘’to maintain the semblance of vitality, western capitalism has become increasingly dependent on expanding levels of debt and of the expansion of the level of fictitious capital. This latter category is made up of financial assets which are only symbols of value, not real values.’’ (4)
Yes, indeed, company shares-stocks that are traded like goods and services do not in the same way embody value. They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value that can create more value. Rising share/stock prices are often presented as evidence of a healthy economy, but the amount money a share/stock charges hands says nothing definitive about the value of the company’s assets or about its productive capacity. On the contrary, it is when real capital stagnates that the amount of fictitious capital tends to expand.
The years roughly between the late 1970s to the present economic impasse have been unprecedented since the emerging and increasing instability of the present debacle of the 2020s. Prior to this each successive wave of crises followed a wave of credit bubbles, when the indebtedness of similarly placed group and groups of borrowers increased at a two of three times higher than the interest rate for three, four or more years which produced a series of credit bubbles in addition. These historical blow-outs have in fact become even more intractable and destructive with the passing of time. Something seems seriously amiss with the system’s dysfunctionalities which have become quite visibly failing. The economic situation in a country after several years of bubble-like behaviour resembles that of a young person on a bicycle – the rider needs to maintain the forward momentum of the bicycle, or it will become unstable. During the initial mania, asset prices will decline immediately after they stop increasing – there is no plateau or middle ground. The decline in the prices of some assets leads to a concern that asset prices will decline further and that the financial system will experience distress. The rush to sell these assets becomes self-fulfilling and so precipitous that it resembles a panic. The prices of commodities – houses, buildings, land, shares/stocks bonds – crash to levels that are just 30 or 40 percent of their prices at the peak. Bankruptcies surge, economic activity slows, and unemployment increases.
The features of these manias are never identical and yet there is a similar pattern. The increase in the prices of real estate and commodities or stocks is associated with euphoria; household wealth increases as does spending. There is a sense of ‘we have never had it so good.’ Then the asset prices peak and then begin to decline. The following implosion of the bubble leads to a decline in the prices of commodities, stocks, and real estate. Some financial crises were preceded by a rapid increase in the indebtedness of one or several groups of borrowers rather than by a rapid increase in the price of an asset or security. These deep-going changes in the world’s global economy were accompanied by political ramifications of a very significant order.
The economic shocks of the post-war period gave rise to the political shocks which if anything were more visible than what was apparent in the economies of the advanced world. Since 1945 everything had after the post-war reconstruction been regarded as L’Age Dor, (Golden Age) as the French had called it. This was a period from the early 1950s characterized by high levels of growth, low and falling unemployment, rising level wages and investment, where in the UK we were informed that ‘we had never had it so good’’ as the Conservative government proudly boasted. The Labour party had held the reins of government from 1945-1951. But things began to change during the 1970s, namely that the political/economic pivot changed definitively in the late 70s and early 80s. The Thatcher/Reagan duo grabbed the bull by the horns and established the new order.
This political/economic dispensation was to last from the early 1980s and through to what was to be the supposed blossoming of the Clinton years of growth and enrichment, the apex of the Anglo-American moment. To be sure: “Pippa’s Song.’’ See Below.
The year’s at the spring,
And day’s at the morn;
Morning’s at seven;
The hill-side’s dew-pearl’d;
The lark’s on the wing;
The snail’s on the thorn;
God’s in His heaven –
All’s right with the world!
Robert Browning (1812-1889)
Yes, if only it could always be like this. But of course, it seldom or never is, as was to be witnessed in due course.
Margaret Thatcher and Ronald Reagan. Dynamic Duo!
The intellectual theorists of the new order – the Mount Perelin Society – an emergent think-tank and intellectual movement behind the Thatcher-Reagan populism. In a both internally coherent framework and an ideology used to promote the power of the owners of capital in general and finance capital in particular. The work of Hayek, Von Mises, and others constituted a serious intellectual exercise grounded in a particular set of values (including Milton Friedman albeit a junior member) namely, a commitment to human freedom, defined by control over one’s property. The fact that this justified for shrinking the size of the state, removing capital controls, and reducing taxes is what led several prominent international financiers (George Soros comes to mind for some reason) to cover a large portion of the costs for the first meeting. So, the party (in terms of both political activity and organization) was calling nearly all the shots.
Another significant event has been the intellectual collapse of Labour and Social-Democratic parties in Europe and possibly even included the left-wing of the US Democratic Party and Bernie Sanders. These were clearly the most significant political events in both Europe and North America during the 1980s. We can list them – all late converts to the neo-liberal paradigm – in France (PS Party Socialist France) (Germany SPD) (Greece PASOK) (Spain PODEMOS) (UK Labour Party) the list goes on. Moreover, having given up on any notion of socialism and equality, these ex-parties metamorphosed into centre-right outfits indistinguishable from the militant conservatives. The leaders of these counterrevolutions were the ineffable bought duo – Bill Clinton and Tony Blair.
The privatization programme was to sweep all before it including on a massive scale the expropriation of public land with little analysis or oversight. The programme of what was once the public sector and which had included, the National Health Service, Education, Transport, Road and Rail, Electricity, Water … was a policy based upon ideological rather than practical considerations; moreover, the list was extensive. Perhaps an example of this policy was education, particularly higher education which was provided and subsidized by educational opportunities in the elite universities. As a British national I was subsidized by generous government grant in 1979/82. I then finished my higher education as a post-graduate in 1986 – again free of charge. It is of course inconceivable that I would have been able to do this today.
The economic system – that is to say the present financialized system prevalent in the Western world – seems to be reaching its crisis point. Quack remedies for the ailing western economic structures, include Central Bank Digital Currencies, CBDCs, and/or the black hole of ever-increasing debt, which apparently will be overcome by issuing more debt (sic) and which are touted as a ‘solution’ to an intensifying structural problem, but which merely intensify the crisis.
According to Marx: ‘’In France and England, the bourgeoisie had conquered political power. Thenceforth, the class-struggle, practically as well as theoretically, took on more and more outspoken and threatening forms. It sounded the death-knell of scientific bourgeois economy. It was thenceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient, or inexpedient, politically dangerous, or not. In place of disinterested inquirers, there were prize fighters; in place of genuine scientific research, the bad conscience and evil intent of the apologetic.’’ (Capital, Volume 1, Afterword to the Second German Edition – London 1873).
The present deep economic crisis is, at bottom, a class issue. The residual elements of the old aristocracy survived the initial assault of the political economists of the 17/18/19th centuries who included Adam Smith (1723-1790), David Ricardo (1772-1823), John Stuart Mill (1806-1873), Karl Marx (1818-1883)/(Friedrich Engels (1820-1895). The ruling class saw the above group as being an assemblage of dangerous radicals who posed an alarming threat to the social and political order. Thus, from their perspective the powers-that-be saw fit to enlist a group of academics called the ‘marginalists’ in 1870. These were the counter-revolutionary mathematicians and included Leon Walras (Frenchman) William Stanley Jevons (Englishman) and Carl Menger (German). Whether or not the repudiation of classical political economy achieved by this counter-group was sustainable is a moot point (see above). But suffice it to say these gentlemen were the ideological foot-soldiers, or, in Marx’s words ‘hired Prize Fighters’ for the rentier classes. Unfortunately, their frozen economic theories survived to the present day and continue to dominate school and university curricula and represent the timeless (and tedious) axioms of micro-economics.
I’ll leave the last word to Michael Hudson.
‘’Real estate, stocks and bonds constitute the bulk of wealth in today’s economies, because most wealth is obtained by rent-seeking – land rent, monopoly rent, and financial charges for special privileges – and even more by capitalizing rentier revenues into financialized assets, all supported by tax favoritism. In contrast to industrial capitalism’s drive to minimize rentier charges to create a lower cost economy with less overhead costs, finance capitalism increases this burden. Regardless of how financiers and billionaire rentier make their fortunes, this rise in rentier wealth is counted as an addition to GDP, subtracted as an exploitive transfer payment …Much as the land and England’s Commons were privatized in the Enclosure movements from 15th to 19th centuries by a combination of force, legal stealth and corruption, today’s post-1980 privatization wave aims at appropriating basic public infrastructure to create opportunities for charging monopoly rent, along with bank lending to privatizers. Privatization and financialization tend to go together – at the economies expense.’’ (5)
Italy: La Lotta Continua! (Ongoing Struggle)
(1) Stolen: How to save the world from financialization by Grace Blakeley. (2) The Corruption of Capitalism – Guy Standing – (Ibid. p. 3)
(3) Grace Blakeley – (Ibid. p.62)
(4) Creative Destruction – Phillip Mullan – (p.22)
(5) The Destiny of Civilization – Michael Hudson – (p.25)
‘The dollar was ultimately nothing other than a piece of high-grade paper with a number and some intricate artwork issued by the US government.’
Was ultimately? It’s ultimate debt marker destination has yet to be reached, but its true worth seems likely to end up somewhat less that that high-grade paper and intricate art work.
Thanks for this synthesis! One point though, the adoption by Europe’s Social Democratic parties of Neoliberalism during the 1980s and early 1990s has a precise cause: the collapse of “real existing socialism” and the Berlin Wall. Prior to those events, if it were not for the Social Democrats and their welfare policies, the average worker in Western Europe would always have looked jealously at the living and working conditions of his counterparts behind the Iron Curtain. Given the structurally high portion of the vote for the Communists in France and Italy (at least 20%) and the strength of Communist parties in some other key countries (Belgium), the US occupiers relied heavily on the support they had been buying from the Social Democrats since 1945. Mind you, the conservatives, liberals (in the European sense) and Christian Democrats were anti-communist by nature. The “swing vote” would be the Social Democrats. After the fall of communism, the US no longer needed them and thus the path as free por them to try and find a seat on the gravy train of Neoliberalism.
Thanks for this added insight.
One might conjecture and I do, that and I have specific to England thraldom commenced circa 1066 and has never let go, ask the Percy’s. It is arguable whether events in 1971 further hindered thraldom, perhaps it did, one thing we do know – is that, joining the Teutonic run club of the damned in Jan 1973, perfect for the rulers, not so good for the serfs.
Sure in England over the Centuries the people thought it, that they’d wrested some powers back but the ruling classes did always hold the cards and usually the courts. Cromwell tried and the ungrateful brain dead, people goaded by the landowning aristocracy cried out for the return of the King, unfortunately, well they would wouldn’t they? Plus, the rest, that parliament bought and paid for. The rottenness stymied and never fully enacted the Reform acts, why would they. rotten boroughs’ mps always controlled by the landowners, rentiers ever our curse, were they not? Not much has changed, except that the poor are still here and the landowners, investment banksters rentiers still pull the strings oh and the statism of the corporate blob neo rentiers.
On it goes, central banking to whose advantage and who gained the most, QE, the big boys always get first dibs and the rich poor gap grows and grows.
One question which tantalizes, here in the UK there has been talk of ‘capitalism’ since Marx coined the phrase. However, evidence of free markets and laissez faire, did the UK ever experience it? I rather think not. Unbridled capitalism, would frighten the ruling class establishment to death. Alack, competition and freedom, anathema to them and serfdom is what you get by order. And as the US drifts into serfdom, we greatly sympathize.
A very good article . However , I feel that the author is overly optimistic when he implies that the coming crash will be 30 to 40 % . Personally I am inclined to double the first figure . Perhaps split the difference ? Anyhow , we will find out fairly soon .
How the expensive houses and flats will do damage to the society.
In Slovenia we have very high prices of houses and flats, especially in Ljubljana (the capital) and all aroud up to 50 km. Right this moment the cheapest normal (not basement) appartment for a family with a kid or hardly two (same room for both) costs 220 000 euro. It is on fourth floor, no elevator, has 69 m2 and is 58 years old. It includes a small garage nearby. It should be renovated of course because interior is old.
A young person in Slovenia gets around 1200 netto monthly. If he is highly educated hardly 2000. Minimal wage is 780 euro. Without help of parents young people can’t buy anything for raising children. Minimum is a 3 -room flat like presented. We also don’t have appartments for long time rent. This is just for the poors (they are officialy poor, but not all in reality). So, young person or pair with a regular job can’t get long time non commercial rent from state or community. An example: a prostitute with a child will get the flate, a single mother with 1000 euro pay won’t. The first one has no taxable incomes, second one has.
Young persons without parent’s help must rent a flat on a commercial level. This means high rent and regular moving from one place to another. The renters are ordinary persons with one or two flats for rent, not companies. They rent for 11 months with 1 month prior notice for renewing the contract. Such a young family is constantly moving every few years. They can’t have anything larger, the interior is mosty old and the cheapest, landowners don’t wan’t to pay for repairing or renovation.
The people need security. The most secure place to live in Slovenia is owning a home. Those people are secure and can have children. Others with no wealthy parents or from countryside won’t have more than one child. The same is with foreigners. They too should have the possibility to buy something own and live in normal conditions.
If the nation wants children, internal migrations, less car traffic and foreigners who come to work and stay they should do something that the prices of houses will become more available. My late uncle was 28 years old and get the first child in his new house in 1956. He was an ordinary worker with no qualifications and his wife also. No you could be a doctor and hardly buy anything suitable witout family help. If the nation wants prospect, this need to be changed.
I feel for you. It is disgraceful , but I have a few things to share:
Like Putin said , friend , “You wanted decommunisation , well you get decommunisation”.
Welcome to EU Vampire Capitalism and Globalisation .
Just goes to show that “ Communism” works if your country is big enough to prevent the US from hurting you. Ie China.
China and its Communism with capitalism mixed in? Ha! Yugoslavia had it first!
“Communist” Yugoslavia gave you a free education, affordable food, healthcare and housing and now look…
I don’t wan’t any communism back. But someone who is working even for a small salary is not a social problem. He is a working man who must be able with some effort and a bank credit to buy himself a place to live. A small one but his. No we have the problem that people have empty houses or flats and don’t pay nothing extra for that. In my street one is selling his house for 400 000 and the other has his house empty for the last 6 years. We also don’t have enough building grounds (administrative decision), we discourage foreign investors, domestic are building small projects (20 – 50 flats max) and state and communes are not building much.
We have a problem where the prices are too high and not for the benefit of the society. Just for the benefit of the middle class who have got their houses cheap and now are selling with huge profit or renting or even doing nothing with them. As I said before. Young people need stability to start their families. This is achieved by affordable prices or by huge state and communal renting inventory. We don’t have nor the first nor the second. The problem will get worse year after year. We need foreign workers who will need to stay somewhere in normal conditions. Such demand is in healthcare and elderly homes. We will not get a good service if workers won’t be able to live normaly.
Brother Ma, Ray and MarkinPNW are correct… Communism is a goal to be achieved with time – it is the working peoples’ utopia; however, we live in the historic time of capitalism. We will get there one day, despite the tremendous effort of the elites to keep their filthy privileges. Try to read more about this issue, to learn what communism is all about and struggle to achieve it – and, with it, the rationality and opportunities you claim for. Because there is no other way out. What you claim above is beyond capitalism and its contradictions.
You say you do not want communism back. But, communism has not been implemented anywhere, yet, although some socialist governments have achieved a significant level of equality and satisfaction of main human needs in their attempt to transition to communism. The present reality implies brutal differences, some of which you have just described. Only governments who genuinely represent the people would implemented fair policies for all. And a fair system will not allow luxury for a few at the expenses of the majority.
If you still disagree with what has been stated and hang on to a negation of change toward a fair system (because this is exactly what those who defend communist ideals want), then get used of being a slave and understand that YOU are contributing to the perpetuation of those inequalities for refuting the direction to overcome them. Is this what you want? If so, then stop complaining and accept your low social condition, poverty, hopelessness… If not, then change your stance toward real change and become part of the international class war against the system that the upper class controls.
That’s why Yugoslavia had to be broken into pieces and crushed into dust.
It was proof that “good Communism” could exist.
That, and the Western Oligarchs also wanted Kosovo’s gold for themselves, instead of for the benefit of Yugoslavia’s people.
Any system can be good and bad, because it depends on the people who run it are good or bad. Of course, the incentive to be able to create money with money makes it easy for people to go in the wrong direction. Many new systems are good at first, but in the wrong direction if they institutionalize over time. Maintaining power is what most people desire and don’t want to give up.
A number of children were asked to play football together, but not to count the goals, so there would be no winner (nor loser). The children thought that this was strange and didn’t want to play. The goal was to win, not necessarily to play football. The goal is the destination, not the journey. That’s actually a big problem for most people. They enjoy the journey too little, because they are constantly busy with the destination. Not understanding that in real life the destination changes every time and you never actually get anywhere to stay for long.
Elites who run stuff are not the biggest problem. The normal people are. They let those elites do their stuff instead of being fully involved in what’s going on. One cannot have power when the mass won’t let it be that way. In my opinion it’s all about evolution and we have to travel this for us all prepared journey. The bad things along the way are learning points, because without obstacles there’s little development and progression. I have a gut feeling there’s not much to be done other than surrender to life itself and let nature (or God) do it’s ‘thing’.
“A number of children were asked to play football together, but not to count the goals, so there would be no winner (nor loser). The children thought that this was strange and didn’t want to play. The goal was to win, not necessarily to play football. ”
This may be a specific example from an isolated experience. In all my years of teaching, the vast majority of children wanted to play for the sake of playing. In most cases they preferred to have close games rather than blowouts and would rather lose by a small amount in a well played game than win in a lopsided manner.
Not sure how that fits into your argument, or anything else here, but just my quick reaction.
Hi Jim, maybe. The children I wrote about were 12 to 15 years old living in a big city. It was shown in a documentairy. Thanks for responding and adding your experience.
In Brazil, from jan-2003 until mid-2016 we had a social-democratic party (PT) with strong action on public health, education (18 universities opened, hundreds of technical schools), food for reasonable price (we had stocks of food to control the prices), housing investments and social programs to help the people. Our airports were full of passengers of all economic levels. We were the 6th world economy. After the coup against our president Dilma Russeff, sponsored by the evil press, managers, politicians and legal authorities (Operation Lava-Jato), looking for power, money and privatization of our public companies and banks, the country dived in a catastrophic scenario. I really hope we come back to those days, bringing Brazil again to the right track.
I just heard on a news site that Bolsanaro is behind in the polls. Good luck, I hope the next president brings that prosperity back for you.
I liked Dilma. She certainly turned out to be the cleanest dirty shirt in the laundry basket. It doesn’t look like Brazilians have a decent candidate for the next election.
Extrañamente entre los economistas que escriben sobre el tema en este blog, no mencionen al famoso libro de Lenin: “Imperialismo, ultima fase del capitalismo”. Que a su vez menciona con mucho respeto a Rudolph Hilferding con su libro “Capital Financiero”
Google-translate from mod:
Strangely among economists who write on the subject in this blog, do not mention Lenin’s famous book: “Imperialism, the last phase of capitalism.” Which in turn mentions with much respect Rudolph Hilferding with his book “Financial Capital”
A fine expose, but to get to the crux of this mess, we need to look at what the US FED did in 2019, right before the big announcement ’round the world heralded in COVID. .
In the autumn of 2019, The FED opened up floodgate of endless streams of billions for the Big Banks, the US Monopolists, Hedge Funds (aka Black Rock) and the rest of Super Wealthy. ETC.
The FED’s spigot poured out billions of EU/UK central banks and the Financial Aristocrats that live there.
Something was up, and there have been a few people who have hit a bulls eye on Why the Fed did this.
We strongly recommend you read Professor Veghi’s article, “Pause For Thought” at http://www.philosophicalsalon.com. Another source that narrated this huge mess was Wall Street On Parade in their 2022 February, or March article. (We’ll try to find the specific month & get back to you.) It’s an easy read, any layman can understand.
The most clear-eyed of some journalists have agreed with Veghi as he points out how the entire US Financial Center had, right before 2019, reached a hallmark of incredible (once illegal) involvement in the derivatives and other shady markets. That, along with Incredible heights of corporate/banking debts pile ups. It’s origins have been noted immediately following the supposed rush within the US financial center began right after the supposed “financial crash” of 2009.
Please read Veghi. We think he’s spot-on.
Fabio Vighi is absolutely first-rate… and not your normal run-of-the-mill financial expert.
He is actually a Professor of Critical Theory and Italian at Cardiff University.
In fact, he is so incredibly honest it would be interesting to know if this Uni had some very unique funding models… clearly he is anything but a private banking cabal shill like so much of academia in today’s sick world.
The link you put up doesn’t work so try the one below. In short, I listen up whenever Fabio has something to say. Coming from a different discipline he often hits on the critical points that so many others miss or ignore…
Also, this earlier one is one of the most brilliant and most perceptive essays I have ever read in my entire life…
An excellent summary of the events of late
Where to, from here?
The news of Michael Burry divesting, the SCO next month, sanctions snd the real effects happening in slow motion. How to position oneself?
I quote from the article:
“The residual elements of the old aristocracy survived the initial assault of the political economists of the 17/18/19th centuries who included Adam Smith (1723-1790), David Ricardo (1772-1823), John Stuart Mill (1806-1873), Karl Marx (1818-1883)/(Friedrich Engels (1820-1895). The ruling class saw the above group as being an assemblage of dangerous radicals who posed an alarming threat to the social and political order.”
According to this article by Larouche
the above description omits something crucial, namely that the supposed radicals and several others, excepting Marx and Engels, were associated with the British EastIndia Company in whose service the Haileybury College trained them
And Karl Marx had the best working conditions in his life when held under the wings of the British elite.
So to say the ruling class saw them as dangerous radicals is not the whole truth. In particular Palmerstons era between 1829 and 1865 meant that Britains ruling class fomented all revolutions and unrest.
Palmerston defended the right to asylum for any fugitive and used it to keep several agents protected in Britain, a practise modern Britain has continued and resulting in London being referred to as Londonistan during the 1990s
Although the author’s underlying point (in agreement with Hudson) about financialization is correct, this section shows a poor understanding of business:
“Most familiar is rental income from land, property, mineral exploitation, or financial investments, but other sources have grown, pari passu. These include the income lenders again from debt interest; income from ownership of ‘intellectual property’ (patents, copyrights, brands, and trademarks); capital gains from investments, ‘above normal’ company profits (when a firm has a dominant market position that allows it to charge higher prices or dictate terms); income from government subsidies; and income from financial and other intermediaries derived from third party transactions.”
For example, capital gains can be made on the creation of real assets of value to society, as well as on ‘financialized’ ones. Subsidies are often designed to encourage & accelerate new developments of real public value. Patents provide incentives for the creation of real technologies useful to society. When those tools are used to make money of piles of paper rather than real projects, then the author is correct.
“In France and England [and now of course, the US], the bourgeoisie had conquered political power. Thenceforth, the class-struggle, practically as well as theoretically, took on more and more outspoken and threatening forms. It sounded the death-knell of scientific bourgeois economy. It was thenceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient, or inexpedient, politically dangerous, or not. In place of disinterested inquirers, there were prize fighters; in place of genuine scientific research, the bad conscience and evil intent of the apologetic.”
A better summation of our current state of affairs I have never read.
Fiat money declines so it takes more of it to buy the same piece of real estate and everything else. But you can’t say the real estate is gaining value because you are measuring it’s increasing price with a shrinking yardstick and or that its losing value when the funny munny destroys the ability of real world traders to price the exchange values between goods and services. When trade exchange dies because of useless money everything in the mainstream market goes to sleep for awhile until a more reliable money can be used for pricing and exchange once again. The real estate remains real and it will still be there waiting for someone who wants to do real things with it long after the existence of the failed fiat money is forgotten. True chattel wealth is measured in the possession of useful things not in a monetary object that is rapidly becoming worthless. The USD might still have use as a medium of exchange and a declining use as a pricing mechanism but only a lunatic would consider it a store of value.
Gold is not the answer.The value of gold is based entirely on psychology and psychiatry and not on economics or physics.
And its easily dilutable too.
We are talking about something which can make barter/trade easier. You prefer paper “money” based on verbal or written assurances you believe in? Or E-money your Gov or Usury Bank gives you on the screen?
Isnt it smarter to have a material in hand which never deteriorate and has been recognized for 2000 years?
Tommy Jensen: “Isnt it smarter to have a material in hand which never deteriorate and has been recognized for 2000 years?”
The “material in hand” could be shares of real economy companies. You are owning part of it. They have had historically best profits with an average annually 8% growth (including dividents). Gold has not been good thing for investors if there is no looming economic disaster coming.
Matias: ” ‘The material in hand’ could be shares of real economy companies.”
Quote article: ” Rising share/stock prices are often presented as evidence of a healthy economy, but the amount money a share/stock charges hands says nothing definitive about the value of the company’s assets or about its productive capacity. On the contrary, it is when real capital stagnates that the amount of fictitious capital tends to expand.” …
[Creating value where there is none by] “expanding levels of debt and of the expansion of the level of fictitious capital. … The paper or electronic certificate itself is not a genuine value that can create more value.”
– A Strange Thing Happened… Francis Lee.
Stocks/shares become overvalued by manipulation (monopoly). Then inflation happens. Gold’s universal value prevents it by eliminating trade imbalances across economic borders.
Ultimately, eliminating any “need” or benefit to the practice of overvaluation.
Gold can be eaten and thus physically and economically attractive for many restaurants. I eat gold at least once a week and I pay cash. https://en.wikipedia.org/wiki/Edible_gold.
Excuse me for this passionate defence of gold.
It may be a passionate defence but it is a defence based on myths.
I noted this one: “the Commission members could not “even agree on the facts”. Physical gold in ones hand is a fact nobody can deny or argue against.
And this one: “large-scale gold production being geographically concentrated in the Soviet Union and South Africa, the opponents argued that a return to the gold standard would make the US hostage to these nations, in the same way oil-dependent states are held hostage by OPEC.
Sure, but we are not talking about gold standard, we are talking about true value against fake, usury and fiat values.
Gold as the most prominent, silver, cobber, oil, m.m. similar has true physical value. I understand Putin’s advisor Glazyev recommend a package of true physical values where gold is a part. Queen Elizabeth’s gold chamber is a myth? No, its a reality.
Thus your argument gold=myths does not hold water to a closer investigation. Try with a gold coin in your hand and feel the fever :-D.
“Financialization” is a euphemism for rampant fraud.
Articles like the one above grossly understate that …
Back to basics:
The only political system is organized crime,
& money is measurement backed by murder.
Human beings live a gangs of robbers in their environment. Civilization was the development of bigger and bigger gangs. The biggest gangsters became the international bankers, the banksters. The ultimate achievement of organized crime is to capture control of the government, by legalizing counterfeiting.
Private banks are allowed to create the public money supplies out of nothing as debts, through nothing by legalized bookkeeping tricks. That was achieved through a prolonged and persistent application of all the methods of organized crime upon the political processes.
Human beings live as entropic pumps of environmental energy flows. That includes everything, such as that the production of destruction controls production. Human beings necessarily live according to the laws of thermodynamics and information theory. However, doing so includes that enforced frauds achieve symbolic robberies.
The so-called “financialization” of the economy was due to the systems based on being able to enforce frauds continuing to double down into about exponentially increasing fraudulence.
I certainly agree that:
“Privatization and financialization tend to go together.”
However, people like Michael Hudson, as well as the article of the article above, that admired Hudson to give him the “last word” deliberately shy away from perceiving how the political economy operates inside of the human ecology, which means they shy away from perceiving that the money system operates inside of the murder system.
Privatization and financialization are aspects of the excessively successfulness of control frauds, whereby there is regulatory capture of the government agencies by those the government is supposed to regulate. In effect, the money system was privatized, and that is now driving the murder system to become privatized.
In general, it is not possible to have better death controls, and therefore, not possible to have better debt controls, because of the profound paradoxes that follow from the excessive successfulness of organized crime.
Warfare was organized crime on larger scales. The history of war made the Globalized Neolithic Civilization that almost totally dominates the whole world at the present time. Since successful warfare was based on deceits and treacheries, those fundamentals with respect to real human ecology drove the political economy to become almost totally based on governments enforcing frauds by banks, and the big corporations that grew up around those big banks. The whole process is basically legalized lies backed by legalized violence (which is euphemistically referred to with terms such as privatization and financialization.)
I do not think that “a strange thing happened” when excessively successful organized crime drove civilization to manifest criminal insanities. Nor will “a strange thing happen” when new systems of organized crime perhaps survive, and so, evolve.
Basically, since we can not agree upon better death control systems, we spiral into the development of the worse death control systems (as currently demonstrated by Ukrainian soldiers being turned into burnt hamburger by the hundreds and thousands every day.) Those who became excessively successful through legalizing their counterfeiting have, of course, created a bogus “economy” that has become about exponentially more fraudulent.
Although it is absolutely impossible for that to continue forever, the future stages of psychotic breakdowns that may exhibit will surely become orders of magnitude greater than anything which has previously happened in known human history.
A Brazilian anthropologist saw human development as a civilizational process preceded by technological advances (Darcy Ribeiro, The Civilizational Process, from the 1960s). It is a fascinating reading.
“all late converts to the neo-liberal paradigm – in France (PS Party Socialist France) (Germany SPD) (Greece PASOK) (Spain PODEMOS)”
There’s a mistake here. The Spaniard social-democrat party that shifted to Neoliberalism and that ruled during most of the 80s and 90s is the PSOE (Partido Socialista Obrero Español), not Podemos. In fact, current Premier Sánchez is a PSOE leader.
Excellent article, thanks.
The different types of economic systems are ultimately meaningless. They all work well in theory. The key is whether there is an independent moderator who can ensure a system is fair. Any system can be corrupted. Until we figure out how to oversee an economic system so it is not abused and manipulated to enrich those supposedly overseeing the system, we can expect every economic system to ultimately fail. Perhaps a computer would be able to perform this duty, although we’d need to make sure whoever input the programs wasn’t paid off.
Recently I’ve read a remarkable book, written in 1957 by one Alisa Rosenbaum. In her book (designated science fiction at the time), she managed to predict the rise of what we today call “social justice” and “wokeism”, the nature of the policies that such things would create and the destruction that those policies would bring. The author also gave a possible solution – the enterprenurs, the inventors, the thinking people, who actually are the driving force tha move the world forward, to opt-out of the society and to leave those “social justice warriors” and “woke” people to try to get-by on their own. In fact, at a lower level this is already happening in the US – the blue-collar workers, on which such things as plumbing, running water and electricity relies to be up-and-running are opting-out choosing to live their own lives instead of working endlessly for the parasites. It’s just a matter of time that the enterprenurs and the inventors follow suit.
The plot in the book occurs in 2016, so the author has predicted the timing quite right. And, unfortunately, it’s no longer a fiction, but a reality. BTW, the author is more known by her pen name – Ayn Rand. The book is “Atlas Shrugged” ;-)
Rentiers don’t much give a damn whether the trains run on time … or at all.
Industry has been exiled to East-Asia. Considering the tawdry weapons being provided recently, and the obese slobs available to carry them, military industry will follow.
Rentiers don’t much care about water, food, electricity … my father provided all these himself (well, the wires were there) and my mother was happy. I too can plumb, and wire, as long as no jealous feeble reports me. So can you. Anybody can dip a bucket into a lake or river. Although 99% of you don’t live near a clean lake or river. You will migrate, or die, or migrate and die.
Rentiers don’t much care if you die … as long as they get their tithes and the best food … also the prettiest girls and boys. You will offer your daughter for the opportunity to carry a bucket and a share of the left-overs from your rentier’s table.
You will also stand on the shore, with your pitchfork, ready to repell the Asian Hordes coming for your rentier’s tithe.
I almost forgot!
Your parasites. How are your enterprenurs, your inventors, your bald-head thinkers, your Ayn Rand; how are they going to eat without parasites to pren the enters, to vent the inters, polish the balds, to buy the paperbacks? While you live your own dream, the parasites are gonna stay at home and scavenge a few crusts. Maybe even work for your cousin, who for sure is not as smart as you, but might be smart enough to organize a ditch-digging or a plundering mob.
but there is more.. The use of the state and understanding the state as the engine that separates the public from the private.. the state is the engine of class differentiation; capitalism can never mature into monopoly isms nor can it privatize anything without the use of the state..
For the capitalist the state is everything. Remove private property there is no monopoly, remove copyright and there is no monopoly, remove patents and there is no monopoly, remove franchises and there is no private utilities, remove government contracts and there is no state secrets. The state is the engine that produces the property rights that create the financial empires that produce the capitalist who parlay them into monopoly powers.
Monopoly power, not capitalism, is the enemy of the working man.
Return to a gold standard – don’t even think about it
You need to go way, way, way, way back to understand MONEY AS A CONSTITUTIONAL PROJECT
The very last thing Michael Hudson would ever suggest is a return to the gold standard. Gold would just act like US treasuries do now.
Why John Locke hundreds of years ago was speaking out of both sides of the same mouth and saying different things.
Which Michael Hudson fully understood.
Ingham is more complicated. He draws on Searle and this notion of collective intentionality. He also draws very much on the notion of legitimacy. Maybe we can just focus on the legitimacy aspect without claiming to do justice to the complexity of Searle. The idea of legitimacy–that people relate to public institutions through legitimacy–means that they’re somehow external. They relate to what they think is legitimate. They don’t relate as thinking beings who understand their relation. They relate to institutions on a superficial level by thinking they are either legitimate or not. From a participatory democratic perspective, it is a very problematic assumption to think that people simply cannot understand the institutions that govern them. And so, Weber is very skeptical of deep, social democracy. He openly states that he’s in favor of elite rule.
The Morale economy by Jakob Feinig
“When I talk about moral economies, I talk about events and processes in which money users relate to the institutions that issue money, and also about monetary knowledge that informs direct action. It can also be electoral action or campaigning. [Moral economies] mobilize an idea of monetary justice that’s not limited to questions of money distribution or demand for welfare payments. They’re about what money is, about money’s public purpose, and about how monetary institutions should be arranged to conform to their specific ideas about justice. The idea of moral economy comes from the British historian, E.P. Thompson. He developed it to counter dismissals of non-elite economic thinking that were and are still common. They are still very present in the historiography about popular involvement in monetary institutions. [Moral economies] are about taking seriously non-elite economic thought. They’re also about how people nominate forms of economic thought and form action.
And so, I’m trying to understand this: who mobilizes moral economies and how are they developed? And, on the other hand, how are they silenced? I derive the term “monetary silencing” from the Brazilian thinker, Paulo Freire, who says that silence about political issues is a relation between those who have a voice, those who don’t, and those who have already been silenced. For him, such situations of silence are dehumanizing because they embody a denial of people’s right to participate in making their own history. So I am looking at processes of monetary silencing, which from his perspective, are also processes of dehumanization because they disconnect people from the institutions that condition their individual and collective lives. [Monetary silencing] is about excluding people from knowledge of monetary institutions and turning them into mere money users and consumers–people whose knowledge doesn’t go beyond using a credit card, depositing a check, or knowing where to get money from a pay-day lender. It’s about silencing anything that comes close to a structural vision ”
MONEY POLITICS BEFORE THE NEW DEAL WITH JAKOB FEINIG
The unfortunate reality of Hudson’s (outdated) assessment is that majority of the investors and stockholders are private and public pension funds, insurance funds, sovereign wealth funds, etc.
All managed for the well-being of those plan subscribers, plus the plan managers of course.
Use your favorite Search engine for “Who owns the stock market?”
Could it be that the unbridled financialization is actually a means to the end of communism/socialism which is a two class system of ruling class and pee-ons?