The Autism Spiral? (obligatory loluk thread)

[Sirial Soulfly]

From Zerohedge:

With the Olympics about to kick off in all its glorious celebration, the sad reality of UK's GDP shrinking 0.7% as the empire drops further into a double-dip. As Bloomberg Brief notes, this came along with a 5.2% plunge in construction output as the IMF estimates austerity has cut 2.5% off GDP. What is most concerning is that GDP has fallen for five of the last seven quarters and is now 4.5% below pre-crisis levels. The level of disbelief is palpable though since the BoE sees only a 10% chance of this recession lasting into 2013 and while it estimates that it will take until 2014 before the UK gets back to the 2008 level (magically), we note that that is already longer than it took during The Great Depression.

http://www.zerohedge.com/news/forget...now-depression

[Bartholomeus Crane]

From Zerohedge:

With the Olympics about to kick off in all its glorious celebration, the sad reality of UK's GDP shrinking 0.7% as the empire drops further into a double-dip. As Bloomberg Brief notes, this came along with a 5.2% plunge in construction output as the IMF estimates austerity has cut 2.5% off GDP. What is most concerning is that GDP has fallen for five of the last seven quarters and is now 4.5% below pre-crisis levels. The level of disbelief is palpable though since the BoE sees only a 10% chance of this recession lasting into 2013 and while it estimates that it will take until 2014 before the UK gets back to the 2008 level (magically), we note that that is already longer than it took during The Great Depression.

http://www.zerohedge.com/news/forget...now-depression

[Sykes]

So I was reading Capital vol III, part V this morning and came across the following passage, talking about the depreciation of fictitious capital created during a bubble, which I thought was interesting in the light of some earlier discussion on this thread.

<snip> Unless this depreciation reflected an actual stoppage of production and of traffic on canals and railways, or a suspension of already initiated enterprises, or squandering capital in positively worthless ventures, the nation did not grow one cent poorer by the bursting of this soap bubble of nominal money-capital.

All this paper actually represents nothing more than accumulated claims, or legal titles, to future production whose money or capital value represents either no capital at all, as in the case of state debts, or is regulated independently of the value of real capital which it represents.

In all countries based on capitalist production, there exists in this form an enormous quantity of so-called interest-bearing capital, or moneyed capital. And by accumulation of money-capital nothing more, in the main, is connoted than an accumulation of these claims on production, an accumulation of the market-price, the illusory capital-value of these claims.

http://www.marxists.org/archive/marx...94-c3/ch29.htm

Put that way, one can understand this present crisis as an attempt by finance capital to hold the rest of us to ransom on behalf of the investors holding big chunks of fictitious capital created by speculation against dodgy derivatives and such.

The gun held our heads being the "actual stoppage" which Marx mentions in the passage above. It seemed as though some people wanted to argue that such disruption would be a) utterly inevitable and b) closely involve all four horsemen of the Apocalypse.

Is that actually the case though? It might be inevitable while all electable parties are wholly in the pocket of finance capital, but it's hardly a law of nature is it?

[Bartholomeus Crane]

So I was reading Capital vol III, part V this morning and came across the following passage, talking about the depreciation of fictitious capital created during a bubble, which I thought was interesting in the light of some earlier discussion on this thread.

<snip> Unless this depreciation reflected an actual stoppage of production and of traffic on canals and railways, or a suspension of already initiated enterprises, or squandering capital in positively worthless ventures, the nation did not grow one cent poorer by the bursting of this soap bubble of nominal money-capital.

All this paper actually represents nothing more than accumulated claims, or legal titles, to future production whose money or capital value represents either no capital at all, as in the case of state debts, or is regulated independently of the value of real capital which it represents.

In all countries based on capitalist production, there exists in this form an enormous quantity of so-called interest-bearing capital, or moneyed capital. And by accumulation of money-capital nothing more, in the main, is connoted than an accumulation of these claims on production, an accumulation of the market-price, the illusory capital-value of these claims.

http://www.marxists.org/archive/marx...94-c3/ch29.htm

Put that way, one can understand this present crisis as an attempt by finance capital to hold the rest of us to ransom on behalf of the investors holding big chunks of fictitious capital created by speculation against dodgy derivatives and such.

The gun held our heads being the "actual stoppage" which Marx mentions in the passage above. It seemed as though some people wanted to argue that such disruption would be a) utterly inevitable and b) closely involve all four horsemen of the Apocalypse.

Is that actually the case though? It might be inevitable while all electable parties are wholly in the pocket of finance capital, but it's hardly a law of nature is it?

That depends entirely on your definitions. For example, these days 'finance capital', as in 'banks', are perfectly willing to screw over their 'investors', as in 'clients', if it means more money for them. That they don't do so wholesale is only because there is more money to be made not doing so.

But overall, yes, from Paulson onwards 'finance capital' have been depicting what would happen if they don't get their bailouts as a veritable Armageddon. And you can question whether or not their proposed cure (massive bailouts) are actually more destructive than just letting things burst.

Take for example BoAML. Clearly it is a too-big-to-fail bank, and pretty much the worst run and performing bank in the US at the moment (although some parts of this massive beast are somewhat healthy). After everyone got scared when they let Lehman go bust, this bank got massive bailouts to keep it from going under. Repeatedly. You can wonder right now if it wouldn't have been better to just let this one blow up as well, using much less bailout money for bailing out out its depositors instead. You can serious question whether the continued propping up of this bank has had any positive effect on the US economy at all. And the same argument goes for the other too-big-to-fail banks.

But that argument isn't without its problems as well. Lehman's collapse could still be dealt with. But if other banks like it would have fallen at that time, like dominoes really, would that not have set back everything that much more as well? All the investors in those banks would be wiped out as well. Much of that may have been investments in 'fictitious capital', but much of it wouldn't. Wouldn't we now be in much deeper problems?

What you can't ignore is how intertwined the whole financial system has become. In Marx time it was still pretty straightforward to draw a line between fictitious and non-fictitious capital. Now that really isn't that easy ...

[Sykes]

The "intertwined" aspect is a fair point. This was brought home to me vividly in 2008 or so because I was doing a piece of work for a container shipping company, which ground to a halt due to the banking crisis. As it was explained to me, people still had goods they wanted to ship, with eager buyers and sellers at both ends, but the banks were refusing to do their part in providing various kinds of short-term credit to lubricate the transactions. Someone actually in the shipping business can no doubt clarify the details. Point is, for a few weeks the volume of shipping apparently nosedived, causing all kinds of knock-on problems, because the banks were having a liquidity crisis and wouldn't perform one of the socially useful roles that they have.

That's why the passage from Marx above resonated with me perhaps. It's also why I absolutely do get the fact that there's an issue with writing off the vast piles of fictitious capital created by the funny-money industry (i.e. investment bankers and such)

There's a fairly obvious solution though. We know a government can run a health service, trains and utilities better than private enterprise. Anyone old enough to recall before and after can tell you privatisations make essential public services worse on the whole. So the fairly obvious approach would be, nationalise the financial sector (which to a certain extent happened during the crisis) and actually take control of it and run it in the public interest. This would involve decommissioning the funny-money bits and taking the socially useful parts of the industry into public control.

The investment bankers, hedge fund managers and their ilk would obviously have to work off the debt to society somehow, perhaps a year doing as minimum wage social labour after a spell in a re-education camp, for every million in bonuses and stock options they received for acting against the public interest. I'm sure we could work out something ...

[Sirial Soulfly]

Some Sunday reading:

Five years ago, the credit crunch began; today it's worse. How long will it last?
There have been small bursts of growth and confidence, but the road to recovery still looks long

http://www.guardian.co.uk/business/2...2007-recession

[orcane]

There's a fairly obvious solution though. We know a government can run a health service, trains and utilities better than private enterprise. Anyone old enough to recall before and after can tell you privatisations make essential public services worse on the whole. So the fairly obvious approach would be, nationalise the financial sector (which to a certain extent happened during the crisis) and actually take control of it and run it in the public interest. This would involve decommissioning the funny-money bits and taking the socially useful parts of the industry into public control.

I'd love to see that simply because there's no way this could possible be wrong, and could possibly fail.

[Sykes]

There's a fairly obvious solution though. We know a government can run a health service, trains and utilities better than private enterprise. Anyone old enough to recall before and after can tell you privatisations make essential public services worse on the whole. So the fairly obvious approach would be, nationalise the financial sector (which to a certain extent happened during the crisis) and actually take control of it and run it in the public interest. This would involve decommissioning the funny-money bits and taking the socially useful parts of the industry into public control.

I'd love to see that simply because there's no way this could possible be wrong, and could possibly fail.

Life is full of uncertainties, but it's not like nationalised banks are completely unknown or are obviously going to make a worse mess of things than the private sector already has.

After all, most of India's banking industry is nationalised, if I recall correctly, and was pretty resilient in the face of the banking crisis.

Hence I don't think one can reasonably dismiss the idea as a priori unworkable, except on the basis of neo-liberal ideology or something.

[Bartholomeus Crane]

I seriously doubt full-on nationalisation of the banking industry is even possible, let alone the question of whether it would actually work out.

What is needed is a break-up of the to-big-to-fail banks. By now this should be a no-brainer. What is also needed is a separation of investment banks and commercial banks. So, bring bank Glass-Steagal. This too should be a no-brainer by now. To prevent things getting out of hand again, what is needed next is more and better regulation. Even if this point is basically a continuation of the previous two point. As we're getting hit left-right-and-centre by schandals from the banking industry by now, this really should be a no-brainer as well.

But even if all this was set into motion right now, and there's nothing that's impossible about implementing this properly, that still leaves the whole financial sector depressed by a massive debt mountain. Part of that is fictitious, but part of it isn't. That has to be tackled as well. There are several ways of doing that, and some have been tried since 2007. The only problem is that what has been tried clearly hasn't worked. And frankly, it doesn't look like it is going to work either.

As so, while the global financial sector is working up to another perfect storm probably next year (when the Euro collapses, the US goes into a clear double dip and then into a harsh depression, and China will no longer be able to cope with its massive property and stimulus bubble either) we better start thinking about new things to do. Not because the 'system' won't be able to recover from this event. It will. Eventually. But because the recovery of that event will probably bring about massive social unrest, last at least a decade, and fuck up the prospects of successive generations as well.

Now, nationalising the banking sector? Right now, impossible to do. Not just because of political reasons. Perhaps when things have gotten really bad it maybe a possibility (because by then the fallout doesn't matter that much).

But that still leaves the question: what would be the benefit?

If it is to get at the bankers then there are much easier ways to do it.

And in order to set up a direct government-based commercial bank, the government just needs to buy up the remaining shares of one of the banks they already own (directly and indirectly), cast off the stuff they don't want, and start competing on the market directly. It'll destroy the other non-competitive banks, but that only means the government doesn't have to nationalise them.

And even then, the government can just dictate behaviour to the banks as it is: remember, banks need a license to operate in a country. That's all the black-mail leverage the government needs to make sure that the banks do what they are told.

All-in-all, I don't see how a complete nationalisation of the banking sector would be of any help to the government. They'll just take on a lot of shitty debt for the tax-payer, for a benefit they can achieve much much cheaper in other ways.

[orcane]

You don't need more regulation, you need useful and actually enforceable regulation.

[Sykes]

Well the benefit I had immediately in mind goes back to the Marx quote a few posts back. We've got a great big recession going on, loads of people, especially young people, unable to find employment. Yet the physical assets and resources are still there. Why are we still in recession? Most immediately (I do understand that there is a chain of causes here) because banks won't perform their socially useful functions. So the immediate benefit of nationalisation is to make them do so.

Governments have tried giving them truckloads of public money, but they just use it to buy other banks and leave the rest of us languishing in a recession. So clearly a change of priorities is needed. I don't think that's possible within the status quo.

There are other potential benefits too however, not least to enforce that separation between commercial banking and the funny-money industry and facilitate the process of writing off the remainder of the mass of fictitious capital causing the problem.

We've had 4-5 years now to see, self-regulation isn't going to work. Someone needs to take those fuckers by the scruff of the neck and make them serve society instead of fucking it up for their own benefit.

[orcane]

Why are we still in recession? Most immediately (I do understand that there is a chain of causes here) because banks won't perform their socially useful functions.

Class warfare is so easy.

[Bartholomeus Crane]

Well the benefit I had immediately in mind goes back to the Marx quote a few posts back. We've got a great big recession going on, loads of people, especially young people, unable to find employment. Yet the physical assets and resources are still there. Why are we still in recession? Most immediately (I do understand that there is a chain of causes here) because banks won't perform their socially useful functions. So the immediate benefit of nationalisation is to make them do so.

Governments have tried giving them truckloads of public money, but they just use it to buy other banks and leave the rest of us languishing in a recession. So clearly a change of priorities is needed. I don't think that's possible within the status quo.

There are other potential benefits too however, not least to enforce that separation between commercial banking and the funny-money industry and facilitate the process of writing off the remainder of the mass of fictitious capital causing the problem.

We've had 4-5 years now to see, self-regulation isn't going to work. Someone needs to take those fuckers by the scruff of the neck and make them serve society instead of fucking it up for their own benefit.

Yes, but for that you don't need to nationalise all the banks. If you want to do that the central banks can just open up a state-owned subsidiary to provide those 'socially beneficial functions'. Let the other banks compete with that (with their massive debt mountains). That way the central banks can print their money and inject it directly into the economy. They don't need to take on the massive liabilities the banks have on their balance sheets right now (which the taxpayers would then be liable for as well). Throw in some additional regulations (for example for easing the transfer of private held debt to the state-own subsidiary) and pretty soon crappy banks, with their left-over funny-money bets, will go belly up. Those that are any good will be able to compete, lessening the burden on the state-owned subsidiary, and now we're on our way to a more healthy financial and banking climate.

Note, however, that this is just one possible scenario. You can do the same, or something very similar in practice without the state-owned subsidiary, and better regulations.

Overall though, we're still in a recession/depression only in part because the banks aren't lending (or doing their 'socially beneficial function'). There's more to it than that. Not least of which is that too many private citizens borrowed too much, and paid too much of that borrowed money for too little.That too creates uncertainty, and that has a big effect as well. It is all intertwined.

But hey, you have to start somewhere. And since the banks sit in the centre of the web in this problem, we might as well start from there ...

[Bartholomeus Crane]

You don't need more regulation, you need useful and actually enforceable regulation.

Fair enough. But prior to the fuck-up we had hardly any regulation. Now we have loads more regulation, but it is all made ineffectual and no one apparently wants to enforce it (or knows how to). See, that's what you get when you let the financial lobby write the rules.

So, yes, we need useful and actually enforceable regulation. But we'll never get it if we let the financial sector dictate their own rules.

[Sykes]

You don't need more regulation, you need useful and actually enforceable regulation.

Fair enough. But prior to the fuck-up we had hardly any regulation. Now we have loads more regulation, but it is all made ineffectual and no one apparently wants to enforce it (or knows how to). See, that's what you get when you let the financial lobby write the rules.

So, yes, we need useful and actually enforceable regulation. But we'll never get it if we let the financial sector dictate their own rules.

Exactly.

edited to add: actually, not just regulation. Also the setting of priorities. Which is why I think you actually need to take control on behalf of society, and introduce social goals and a different mindset, rather than just try to monitor and regulate a system being steered at present, as far as I can tell, according to largely anti-social goals.

See e.g. http://en.wikipedia.org/wiki/Twelve_leverage_points

[Bartholomeus Crane]

You don't need more regulation, you need useful and actually enforceable regulation.

Fair enough. But prior to the fuck-up we had hardly any regulation. Now we have loads more regulation, but it is all made ineffectual and no one apparently wants to enforce it (or knows how to). See, that's what you get when you let the financial lobby write the rules.

So, yes, we need useful and actually enforceable regulation. But we'll never get it if we let the financial sector dictate their own rules.

Exactly.

edited to add: actually, not just regulation. Also the setting of priorities. Which is why I think you actually need to take control on behalf of society, and introduce social goals and a different mindset, rather than just try to monitor and regulate a system being steered at present, according to largely anti-social goals.

See e.g. http://en.wikipedia.org/wiki/Twelve_leverage_points

That's actually very interesting. But if you go down that list and translate it to the financial sector, you cannot but notice how skewed most, if not all, leverage points have become towards the financial sector itself, and how little, apparently, society and/or government is still capable of pulling on those levers.

My point still remains though. Clearly I think 'the system' has been gamed too far into one direction. But total nationalisation and government control would be gaming 'the system' in the entirely opposite direction. I'm not a 'big government' guy (in the classical sense), never was. So my ideal point would be to revert control over those levers to somewhere in the middle of both parties. In other words, government should have a strong and powerful regulating role in the system, to prevent fallout on society. On the other hand, the financial sector itself should also have some say in the matter, so as to not stifle the whole system with over-regulation.

It is a balancing act, although right now, it is quite obvious to me, that there is no balance whatsoever.

[Sykes]

Did you follow the link to her original article? It's quite entertaining ...

So one day I was sitting in a meeting about how to make the world work better — actually it was a meeting about how the new global trade regime, NAFTA and GATT and the World Trade Organization, is likely to make the world work worse. The more I listened, the more I began to simmer inside. “This is a HUGE NEW SYSTEM people are inventing!” I said to myself. “They haven’t the SLIGHTEST IDEA how this complex structure will behave,” myself said back to me. “It’s almost certainly an example of cranking the system in the wrong direction — it’s aimed at growth, growth at any price!! And the control measures these nice, liberal folks are talking about to combat it — small parameter adjustments, weak negative feedback loops — are PUNY!!!”

http://www.donellameadows.org/archiv...e-in-a-system/

[Azure]

Did you follow the link to her original article? It's quite entertaining ...

So one day I was sitting in a meeting about how to make the world work better — actually it was a meeting about how the new global trade regime, NAFTA and GATT and the World Trade Organization, is likely to make the world work worse. The more I listened, the more I began to simmer inside. “This is a HUGE NEW SYSTEM people are inventing!” I said to myself. “They haven’t the SLIGHTEST IDEA how this complex structure will behave,” myself said back to me. “It’s almost certainly an example of cranking the system in the wrong direction — it’s aimed at growth, growth at any price!! And the control measures these nice, liberal folks are talking about to combat it — small parameter adjustments, weak negative feedback loops — are PUNY!!!”

http://www.donellameadows.org/archiv...e-in-a-system/

"That’s why my systems intuition was sending off alarm bells as the new world trade system was explained to me. It is a system with rules designed by corporations, run by corporations, for the benefit of corporations. Its rules exclude almost any feedback from any other sector of society. Most of its meetings are closed even to the press (no information flow, no feedback). It forces nations into positive loops “racing to the bottom,” competing with each other to weaken environmental and social safeguards in order to attract corporate investment. It’s a recipe for unleashing “success to the successful” loops, until they generate enormous accumulations of power and huge centralized planning systems that will destroy themselves, just as the Soviet Union destroyed itself, and for similar systemic reasons."

I'd +rep her if i could.

[Bartholomeus Crane]

Very interesting read indeed.

[Sykes]

Only one voter in six believes the coalition will survive until the 2015 election, according to a Guardian/ICM poll that shows the proportion expecting a collapse within two years has nearly doubled in two weeks.

http://www.guardian.co.uk/politics/2...ollapse-voters