Market extremism by Kevin Phillips ----------  Introduction from Destiny is Real PQ Wall (Charlie Walters tip) ----------  --------  csf snippets: Jim Craven review of "Economics as Religion" -- Paul Krugman on Kevin Phillips ----------  189801 Rainbow Gathering 2002 ---------- ----------xxxxxxx-----------  V13/13/phillips-k.html Market extremism doesn't wear hoods, white sheets, or armbands. Skinheads in its ranks are few. Suicide bombers in its cause are even fewer. But the essence of extremism, as opposed to other specific "isms," is to extend -- harshly, rigidly, and dangerously -- a commitment and ideology that in softer and milder forms can be acceptable or useful. Worship of an unfettered, self-justifying marketplace developed in exactly this harsh, rigid form during the 1980s and 1990s. The infamous practices of Enron -- where market mania turned abusive, with the help of the Bush family -- are only the tip of one berg in an ice field that continues to threaten national political and economic navigation. Over the last 15 years, market-based excesses have run the gamut from crony-driven privatization of public assets and attempts to remold U.S. law into a branch of laissez-faire economics to even bolder efforts to recast U.S. election finance as a marketplace. These unchained markets have reshaped the global economy around international mechanisms -- such as the World Trade Organization (WTO) -- empowered to override local and national laws and regulations in the name of investment flow. Market mania has emerged as the both the pivotal crippler of U.S. democracy and the driving force behind the upward redistribution of U.S. wealth. It has made the egalitarian principles and patterns of the 1950s and 1960s vanish in a cloud of dust. On the other hand, this market zeitgeist has its own history of vulnerability. If the Democratic Party and liberalism have a history of doing themselves in through naive international policies and cultural excursions that lacked majority support -- causes from Southern slaveholding in the mid-nineteenth century to agrarian insurgencies in the 1890s and urban and campus radicalism in the 1960s and early 1970s -- the self-destructive face of Republicanism and conservatism has involved markets, corporations, and fealty to the rich. These penchants characterized the Gilded Age of the late nineteenth century, the Roaring Twenties, and the last two decades. Edward Chancellor, in Devil Take the Hindmost: A History of Financial Speculation, notes that the first bourse in Amsterdam was a place where gentlemen refused to go, sending agents instead. Gambling analogies pervaded the early financial markets (and still plague current ones). The famous eighteenth-century financier John Law doubled as an expert at the game of hazard. The term "blue chip" used in the stock market came from the highest denomination chip in the Monte Carlo casino. One can only wonder at the gall of the American and British think tanks and pundits who have held out "markets" as an alternative organizational basis for society (to replace the notions of state, polity, and community developed over 2,000 years). The self-interest of their corporate and upper-bracket patrons, of course, is more obvious. Still, the cautions befitting the market's dubious background were pushed aside in the 1980s, as a curious mix of zealots and self-servers decided to exalt markets in general -- and the financial markets in particular -- into the premier institutions of American governance. Seriousness was abandoned, just as it had been a century earlier when kindred U.S. business and financial apologists latched onto the social Darwinist theories of an Englishman, Herbert Spencer, in order to justify the dog-eat-dog economics at work in the United States. The Gilded Age economy, said William Graham Sumner of Yale, simply exemplified the "survival of the fittest" that Charles Darwin had found in biology. U.S. Senator Chauncey Depew prattled to New York millionaire audiences about their being the chosen ones of a grand evolutionary process. A century later, it wasn't social Darwinism but rather market-centric perspectives that were invoked to explain a wide range of phenomena. The public-choice school of thought framed politics itself as a counterproductive snarl of interest-group competitions and urged an alternative ideology that emphasized market principles. In such crusades, markets were never discussed factually as arenas in which money prevailed -- arenas therefore innately favorable to wealth concentration and to the interests of the rich. Instead, they were dressed up in more appealing clothes as the truest vehicles of democracy. In retrospect, it all quacks like the duck in the AFLAC commercial. The marketplace, in this fantasy, became the ultimate forum where the people could express themselves, where they could do battle with Harvard-type elitists who didn't want them to spend their money on large automobiles. The sages of The Wall Street Journal editorial page told readers in the mid-1990s that voters wanted to be treated as customers, not constituents. Former Citicorp Chairman Walter Wriston, famous for almost wrecking his bank with earlier unwise loans to Latin America, opined in 1992 that "markets are voting machines; they function by taking referenda." The proletariat, predicted Wriston, would eventually "fight to reduce government power over the corporations for which they work, organizations far more democratic, collegial, and tolerant than distant state bureaucracies." Parallel balderdash issued from Newt Gingrich during his brief mid-1990s reign as House speaker. He dreamed about the possibility of establishing a "consumer-directed government," once suggesting that critical social problems could be resolved simply by asking "our major multinational corporations for advice." All of this hot air about a new era -- at least partially based in the perfectibility of markets -- helped launch the four-year speculative bubble that finally burst in 2000–2002. But kindred thinking also helped blueprint other dubious market-manic constructions that still stand. For a short list, consider these: excessive deregulation of finance and energy, privatization of public assets, privatization of Social Security, and the use of transnational organizations such as the WTO and NAFTA to override local and national laws, in the United States and elsewhere, that interfere with market absolutism. These may become some of the great battlegrounds of the early twenty-first-century economy. Another could take shape around attempts to justify globalization as a market-driven inevitability. No serious opposition politics can emerge that does not challenge at least the extremes of this faith in markets, but no faith could be riper for the picking. Its conceptual underpinnings were questionable enough -- though they did not get enough questioning -- six or eight years ago. Since then, the NASDAQ crash and the Enron, Arthur Andersen, and Merrill Lynch scandals have told the average American enough about the fallibility of business, finance, and markets to make the new-economy truisms of five years ago sound like the premises of cranks. Extreme politics, in this new form as in others before it, has a distinct regional home. As much as the ideological excesses of the left in the 1960s evoked Berkeley, and the militia groups on the right were a Rocky Mountain phenomenon, the market mania of the last two decades has centered on Texas -- economic Lone Ranger country, where market fundamentalism and religious fundamentalism have joined to create a uniquely strident culture. In Texas, government doesn't get in the way of "bidness." Pollution flourishes, there's no income tax, and the state's biggest city, Houston, won't tolerate zoning. In Texas, the business and academic infrastructure lists well to the right of that in any other major state. The Federal Reserve Bank of Dallas is the most conservative and market-propagandistic of the 12 regional federal reserve banks. Think tanks connected with the Texas GOP congressional delegation can be counted on for economic tracts that make Southern Baptist Convention resolutions look subtle and avant-garde. Twenty years ago, a still-Connecticut-tinged George Bush Senior made his famous remark about supply-side tax cuts being "voodoo economics," but he learned fast. By 1985, when Texas-based Enron was formed, Vice President Bush was already captaining the Reagan administration's Task Force on Regulatory Relief, and his four-year term as president would produce two pieces of market-worshipping policy that proved vital to the company's future operations. These were the 1992 energy act, which obliged utility companies to transmit electricity shipped by Enron and other marketers, and a regulation issued by the Commodity Futures Trading Commission, which created a legal exemption that let Enron begin trading energy derivatives. Enron was en route to its millennial climax: speculating, trading, and manipulating energy costs in deregulated markets. And the Bush family and retainers clustered around it like bees around the honeycomb. This collusion was not without reward, but it also left Bush père et fils, and market mania, open to attack. It isn't often that a major issue in U.S. politics -- perhaps even a potential watershed issue -- comes with such a juicy related scandal. Not long ago, this vulnerability of Texas royalty and Texas philosophy would have been hard to imagine. Now, market extremism is in the dock of public opinion. The question is not whether a coherent and powerful indictment can take form, but whether the Democratic opposition in Washington is capable of shaping and voicing it. Kevin Phillips Copyright © 2002 by The American Prospect, Inc. Preferred Citation: Kevin Phillips, "Market Extremists Amok," The American Prospect vol. 13 no. 13, July 15, 2002 . This article may not be resold, reprinted, or redistributed for compensation of any kind without prior written permission from the author. Direct questions about permissions to -------------- -- from Destiny is Real INTRODUCTION: Destiny is Real [BACK TO TOP] by David Knox Barker Author of The K Wave Irwin Professional Publishing Every generation witnesses advances in the hard sciences and the emergence of new theories about the design and structure of the universe. But progress in the form of philosophical discourse about man’s unique role as a thinking and willing participant in the universe, in light of new hard science, is rare. We have come to worship at the altar of technological advance. Material and mechanical progress is glorified. Reflective thought about our role as fallible beings with herd instincts is eschewed. Our civilization has crawled out on a technological limb, taking up the mantra that progress will always have an answer, always save us from ourselves. A few leading scientists in the fields of physics, microbiology and mathematics, stunned by the unknowns of relativity and chaos theory, have been edging back off the same limb, waxing more philosophical than scientific at what they are discovering. Philosophical insight, when combined with the scientific evidence, can give us a new perspective. This book melds science and philosophy. The result is the raw power of rough but original theory in its purest form. Truly new systems of thought, those that would ascend to the level of the holy grail of a unified theory, are as rare as civilizations, and would appear to be lost with them. Rome thought it had the answers for science and society. We know little of what great works have been lost over the millenniums. What secrets burned in the library in Alexandria, or produced the mathematics to build the pyramids? What systems of thought, perhaps unwritten, would unlock the secrets of Stonehenge, or delivered the unified vision before the confusion that destroyed Babylon? Fully cognizant of the boldness of the claim, I suggest that this book is such a work. The use of a major market index chart for field analysis is unique. It overlays a rough sum of the action of human particle participants in fields of space and matter with reference points in time. It is not a static shot of matter at a fixed point in time. It displays the energy released in the flow of time. Field theory applied to markets is a reasonable request. For years science has studied the rotation of the earth around the sun and has interpreted the orbit and the planet as the real thing. The fixed location of planets based on Newtonian physics was tangible. But beginning with the work of James Clerk Maxwell, on electromagnetic fields, field theory has come to suggest that the gravitational field is the real thing. The precise location of the planet’s mass in a space time orbit is only the present but passing physical manifestation of the invisible field. In the same spirit of such fields, a point on a stock index chart is only one point in space and time for the orbit of the social organism known as civilization. The influence exerted by the whole field of interconnected human particles, all pursuing their individual action, is more real than its present suspended position in space and time. Quantum field theory is now saying the same thing at the atomic and sub-atomic level for matter in space and time. A select few that read this book will begin to see the patterns. You may have sensed them all along. Either there is a great force at work in our universe or there is not. The presence of pattern suggests life is no mere accident, but arose by design. It manifests a grand scheme. If you accept that Destiny is Real, you will increasingly begin to marvel at the wonder of the patterns. There is indeed order within the chaos, producing, as P.Q. is fond of saying, “the sunlight of the mind”. [BACK TO TOP] FOREWORD: Destiny is Real [BACK TO TOP] by P.Q. Wall The life work of the author has been an empirical uncovering of a repetitive sequence of public moods that underlie changes in the historical/economic realm, a sort of Chinese nest of boxes on four levels, shorter inside of longer, that repeats also fractally. That is to say, it repeats in time and also on descending levels of size within time. In a way this is two books in one. Financial people will find interest in Parts One and Two to see if these findings can be made to work for them. Actual excerpts from our market letter, which is a matter of public record, show in Part Two a series of forecasting hits that could not possibly be chance. But there will be others more intrigued by what this might imply about the world we live in. These might wish to turn directly to Part Three Chapter VIII to find our thoughts on this score. In essence this interpretation follows a line of Heraclitus, Nietzsche and Spengler in developing a warring subjective/objective dualism that must have parallel in the macrocosm since it bespeaks the inmost essence of microcosmic me. Chapter VII, from an older version of this book, attempts to draw further applications far and wide from the central thesis in a discursive and densely packed manner. Even close readers might want to omit it entirely. Academics in their aeries solemnly pronounce that market movements are random. Yet if one reads Market Wizards and the New Market Wizards by Jack Schwager for a peep into reality one finds untold billions moved daily by those who study trends. The dogmatic hypocrisy of it is ludicrous. Are not emotions public as well as private? Is not the public angry in wars, greedy for pleasure in decadence, frightened and gloomy in a depression? Is everything in the world controlled by fields—except emotional events? This question shows that science is never more subjective than when confronting the subjective. Like a mischievous boy this book upsets the whole anti-instinctive apple-cart of science and for this alone, even setting aside its theoretical discoveries, it is a new departure for science. Yet the author knows also that these matters are somewhat more controversial than the Pythagorean theorem, and that the tough-minded aspects of these discoveries may have to wait for a less democratic science of the future, one given more freedom to pursue this branch of truth. In this book I would like to think that science turns a corner from the study of things toward an equal or greater study of forms. But in the end forms cannot be studied without three assumptions now considered mere baggage of philosophy: 1. world purpose, 2. values, and 3. a special gift needed in those who verify. Yet the new principia of this turn in the road can be stated simply as unity breaks down into warring contraries. All things are: Six of our twelve contraries are those below the dashed line. The other six are seen below. These show the threeness principle in time which appears in joyful beginnings. vs. gloomy endings of what are called here cyclic Months (not actual months). Everywhere in symbolism and mythology are these twelve contraries. This new departure must reject only one world view, naive reductive materialism. Its mourners should recall that our observations arose empirically when aspects of trends led to better forecasting in the financial markets than accounting or economic studies. The obvious conclusion was that trends, and the collective unconscious behind them, dictate events—not the opposite as people think. The ancients did not mince words. The superior pattern recognition of the wisest ones could see that form-purpose opposes thing-purpose in the world, that this opposition in fact is the world. And so they called the mysterious form-purpose spirit or soul and they recognized that higher forms of it were guiding mankind unbeknownst to it. Meaningful coincidence, a mysterious/telepathic coordination at a distance, is now absolutely proven to underlie the world in modern physics. Without it, how could the life force rise in complexity to counter for so long a time the running down of mechanical clocks? There is a long and growing list of the most bizarre long shot oddities discovered about our universe, without any one of which higher forms could not have arisen, collected in modern physics under the rubric of the Anthropomorphic Principle. To Hegel with his dialectic, to Schopenhauer with his Will to Life, to Nietzsche with his Will to Power, to Spengler with his organic rise and fall of civilizations it was obvious long ago that material particles moving randomly by a few mechanical laws could hardly be the whole story. The democratic view is that their insights will be crumbled by science. To the contrary, science is now on the fault line of far deeper discoveries where it has been preceded by them, and by thinkers like Heraclitus long before them and others even before that in prehistoric eras who discerned ongoing principles of form-purpose. The extent to which the ancients divined these notions, and the extent to which we can prove it, are of minute importance compared to the scientific truth of them. But the aristocracy of pattern recognition would far have antedated physical science. Science will have to spread past the now visible fault line of mere thing-purpose into this more aristocratic realm of higher pattern recognition, or else give up truth itself and simply perish in the fanatical rear guard action of the increasingly strident Ayatollahs of neo-Darwinism. The outrageous moralistic dogmatism of current scientific journals already shows that few scientists are equipped for these new realms. Where the most advanced interplay of forms meets matter, i.e. in biology or in artificial intelligence (brain/computer/mind comparisons) there have the high priests like Richard Dawkins and Stephen Jay Gould gathered to warn us off any theories beyond their own random/materialist/mechanical monomania. Science will have to improve its product into areas less commercially salable to the naive utopian masses, or finally have no new product at all. We have already seen the earthly hell derived from the supposedly scientific principles of Marx. In the next few centuries Big Brother will rise and then begin to die as he retreats toward Asia in the manner of Constantine. The story of Noah's ark may be the metaphor of a new level of insight, into which all those we love cannot be fitted. Scholars are slow motion people whose avoidance of the fast lane does not entirely arise from ascetic self-denial. In our own age right here and now scholars have become a model of what all people should supposedly be. Scholars are clearly useful and by slowing reality down in the observation of details they uncover much useful information. But real life decisions in the heat of competition are of necessity hurried and hence more dependent on flash judgements, overview and superior pattern recognition. These abilities, and the greater immersion in the more urgent time world of form-purpose may explain certain reservations about scholars often held by men of affairs and in particular more aristocratic ones. A final point: if one sees a wolf searching the forest randomly for food that does not necessarily mean that the forest and the wolf within it must have arisen by purely random processes. In the same way, if the life force rises to higher complexity by natural selection of accidental mutations, this does not necessarily disprove a larger guidance. ---------------------------- 2002II/msg02513.html -----Original Message----- From: Steve Diamond To: Nicole Channing; Ethan Schwartz; Brett Byers;; Sent: 6/19/2002 3:43 PM Subject: [PEN-L:27032] the "Satanism of money and credit" The Quirky Nature of Credit by Christopher Mayer One change in the fabric of American finance that is particularly striking over the years is the proliferation of credit and the growth of nonbank financing. The primary creditors of the nation's debtors are not banks, but are so-called nontraditional lenders--such as GE Capital, the financial services arm of General Electric (which, interestingly enough, provides 40 percent of GE's total earnings. And you thought GE made money selling stuff!). This was highlighted in a recent Wall Street Journal piece, where it was pointed out that GE Capital's total assets of $425 billion exceed all but three banking conglomerates. According to the article, banks and thrifts contribute a proportionately smaller share of financing to the nation's credit market today compared to years past. The Journal comments, "Twenty years ago, banks and thrifts supplied 40 percent of the nation's credit. Ten years ago, it was 26 percent. Today, its down to 19 percent." Credit and finance have become the business of America, no longer dominated by banks, thrifts, and their ilk. The Wall Street Journal notes that approximately 40 percent of the earnings from the companies in the S&P 500 came from lending or other financial activities. Many retailers issue credit cards through banks that they own. Naturally, the question arises as to what the consequences of such a trend might be, particularly given the quirky nature of credit, soaked as it is in a paper-based monetary system. The Wall Street Journal reporter opines, "The benefits of this change in the financial underpinning of the economy were evident during the recession. As banks tightened lending standards, alternative lending and capital markets took up the slack." He points to the well-publicized zero-percent-financing offers by auto manufacturers and to companies like Boeing Capital, which lent UAL $700 million to buy planes when the capital markets shunned them. The old guard of easy credit also helped grease the axles, as Fannie Mae's and Freddie Mac 's assets have risen 21 percent and 35 percent, respectively, since the end of 2000. These two behemoths alone hold as much mortgage debt as all commercial banks combined. Bank assets, in contrast, rose "just 8 percent," the reporter ruefully tells readers. So here, the unwritten assumption is that keeping the spigot of credit open is better than the alternative. Credit is the fuel that feeds spending, and spending, so the conventional thinking goes, is the key to economic growth. The more companies offering credit, the more readily available it becomes, making everybody better off. Easy credit means easy money, ergo prosperity. For every creditor there is a debtor One has to wonder if more credit is a good thing. After all, every dollar extended in credit creates a corresponding liability or debt. In theory, at least, debts must be repaid. The risks of debt and leverage become muted under the sunny optimism of boom-time economics. However, the realities of leverage do not change because they are ignored; like the fundamental forces of nature, suspension of belief does not diminish their power. Leverage in finance is similarly unrelenting. The economist Benjamin Anderson explained the Great Depression in terms of a great excess of credit. He called cheap money the "most dangerous intoxicant known to economic life." "Artificially cheap money," Anderson wrote, ".created a vast fabric of debt, internal and international. As the volume of this debt grew, its quality greatly deteriorated." He noted that "the period 1931 to March 1933 saw the progressive collapse of the unsound portions of this vast fabric of debt." To take on a lot of debt is to exhibit a great deal of confidence about what lies ahead and in your ability to pay it back. It is also a matter of belief on behalf of the creditor. Debt, in essence, is a bet on a rosy future. While no one can predict the future, it is safe to say that no one can borrow indefinitely, either, for the simple reason that there will be a limit to what a consumer--or business, or government--can borrow and yet still remain solvent. It is sort of a natural law of credit that as the volume of credit expands to more and more debtors, the quality of such credits deteriorate. Not everyone is creditworthy, and as the pool of credit widens, the fringes are shallower than the deeper center in terms of financial resources. As Greenspan talks positively about the health of the U.S. banking system, one also has to wonder whether a strong banking system matters, given its diminished role in providing credit (and letting pass, uncontested, the idea that the U.S. banking system is healthy--a highly debatable point). Consensus opinion holds that the Fed has some control over the money supply through its traditional means of manipulating bank reserves and interest rates. How much of that is cast into doubt, since nonbanks are doing the bulk of the lending? To his credit, the Journal reporter also notes that all this credit has a downside. Steve Galbraith, an investment strategist with Morgan Stanley, is quoted as saying,  "Banks are not the place to be looking for the next blowup . . . because of the greater importance of these nonbank financial companies, odds are you'll get a hiccup in this area." Which begs the question: What would the impact be if a GE Capital or Fannie Mae started to have financial difficulties? Would the effect be as deleterious as a failing banking behemoth? And would the Feds bail them out, too? In the span of less than a year, the government has, in one way or another, "saved" airlines, domestic steel manufacturers, domestic lumber producers, and, most recently, American farmers. How likely is it that the government will be able to resist saving Fannie Mae? Some will advocate increased regulation of these nonbanks to conform with, or exceed, existing banking standards. But these are superficial remedies for a problem that lies much deeper. We've had banking regulations and numerous oversight bodies for a long time, and that has not stopped financial crises from developing. The problem is the money itself. The Satanism of money and credit The quirky nature of credit is that it is not necessarily better in abundance. It's not like beer, butter, and bananas--where more means cheaper, and cheaper is good. Credit is like money; it represents buying power. Garet Garret called money's paradoxical quality the "Satanism of money." When it is plentiful enough, it is not worth enough, but when it is worth enough, it is not plentiful enough. The same sort of thinking applies to credit. More credit means more buying power, which means a bidding up of assets and a spark for an unsustainable boom. Murray Rothbard wrote that "credit expansion always generates the business cycle process, even when other tendencies cloak its workings." Many economists and commentators point to the relatively low inflation rate during the boom years and the low-interest-rate environment of those years. "But prices may not rise because of some counteracting force," Rothbard notes. Indeed, productivity growth, an increase in the supply of goods, and an increase in the demand for dollars can absorb the increase in money, temporarily masking its inflationary effect. The great merit of gold as money lies in the fact that the quantity of gold is limited by nature and by the amount of human energy and capital dedicated to mining it. As a result, gold holds its value. Wilhelm Ropke once wrote, "In the course of the centuries, no wager has been more of a certainty than that a piece of gold, inaccessible to the inflationary policies of governments, would keep its purchasing power better than a bank note." Gold acts as a natural limit to money, and for that it will always be the enemy of inflationists and governments. The flaw in today's financial system is that these limits do not exist. Doug Noland, writing for, observed that the ".character of money and the contemporary credit-based system's ability to create uncontrolled quantities is a crucial ingredient in precarious financial excess." According to Noland, "the explosion of nonbank entities easily explains the relatively slow growth of bank assets (loans) in the midst of historic credit excess." The fact is that you can't look just at banks or the Fed anymore. There are many more purveyors of credit than banks. All of this growth in credit has put in motion the boom-bust sequence predicted by Austrian theory. The state of American credit is already weakening. There are only eight AAA-rated companies left in America (General Electric, UPS, AIG, ExxonMobil, Johnson & Johnson, Berkshire-Hathaway, Pfizer, and Merck), compared to 27 in 1990 and 58 in 1979. The first quarter of 2002 was one of the worst quarters on record for corporate bonds. Some 47 issuers defaulted on their debts, for a total of $34 billion in bad debt. Personal bankruptcies are at record highs. More consumers filed for bankruptcy in 2001 than in any other year. Savings are low, and an increasing percentage of disposable income is being used to service debt. Of course, these concerns also extend to government--the worst offender of all. The U.S. government cannot control its appetite for spending, and year after year, it spends more than it takes in, going ever deeper into debt. Many will probably be surprised to learn that government debt continued to grow even during the Clinton years, despite the administration's claims that the budget was balanced each year. Government borrowing continues to reach new highs with each passing year. As The Wall Street Journal reported, in March of 2002, total federal debt stood at $5.924 trillion, and the Bush administration was seeking to raise the limit to $6.7 trillion. As Representative Ron Paul observed, "the federal budget is essentially a credit card with no spending limit, billed to somebody else." Moreover, as Paul observes, politicians come and go, but "the benefits of deficit spending are enjoyed immediately by the politicians, who trade pork for votes and enjoy adulation for promising to cure every social ill." The only solution to these problems--the explosion of credit and debt, the gradual destruction of the currency, the boom-bust sequences--is to wrest control of money from government hands and back into the market. Let the market decide what should be money. For centuries, gold was the money of choice, and there is a growing suspicion that it will be again. ------------------------------ Title: RE: [PEN-L:27032] the "Satanism of money and credit" I'm sorry, Steve, but I don't have much respect for these "Austrian" ideas. Non-bank lending isn't scary, since the Fed had just as much control over the monetary system as it did when banks and their ilk dominated finance. If the Fed wants more control, there has to be more regulation. If the Fed has lost control, it's because of deregulation. The Fed used to control the economy by inducing credit crunches. This power went away with the ceilings on deposit interest rates at banks. Debt isn't necessarily bad. It depends on what kind of spending is done when the debt is accrued. If debt finances real investment that has a chance of being reasonably profitable, there's no big problem, but if it goes to finance gambling there is. It's a medium problem if debt finances consumption, unless that consumption has an obvious collateral. It also depends on the rate of profit on real assets; if debts accumulated in the past involve interest rates that exceed the current rate of profit, it can lead to bankruptcy, unless the debt can be refinanced at lower rates. Gold seems a silly idea at best, one that encourages deflation (which is bad medicine, given all the debts that people have accumulated). Money these days is based on state power (primarily U.S. state power), not the natural scarcity of precious metals. It's amazing that the author blames the U.S. government for being spendthrift in an era of fiscal austerity -- until the recent recession and the uptick in military spending. Of course, as "Austrians" they don't understand the valid parts of Keynesian economics, since they (implicitly) assume continuous full employment. They assume that the "market" and the Entrepreneurs would produce the best of all possible worlds -- except that the satanic government insists on messing things up. Jim Devine ------------------------------- Krugman on Phillips by Ian Murray 14 June 2002 03:50 UTC < < < Thread Index > > > [when Phillips was on local talk radio in Seattle last week a caller asked him what he thought of the Santa Clara case through to Buckley v Valeo. KP replied the whole history of it and related corporate governance issues are an outrage, thank god people are finally talking about it and corps need to be completely redesigned] June 14, 2002 Plutocracy and Politics By PAUL KRUGMAN Kevin Phillips's new book, "Wealth and Democracy," is a 422-page doorstopper, but much of the book's message is contained in one stunning table. That table, in the middle of a chapter titled "Millennial Plutographics," reports the compensation of America's 10 most highly paid C.E.O.'s in 1981, 1988 and 2000. In 1981 those captains of industry were paid an average of $3.5 million, which seemed like a lot at the time. By 1988 the average had soared to $19.3 million, which seemed outrageous. But by 2000 the average annual pay of the top 10 was $154 million. It's true that wages of ordinary workers roughly doubled over the same period, though the bulk of that gain was eaten up by inflation. But earnings of top executives rose 4,300 percent. What are we to make of this astonishing development? Stealing (and modifying) a line from Slate's Mickey Kaus, I'd say that an influential body of opinion has reacted to global warming and the emergence of an American plutocracy the same way: "It's not true, it's not true, it's not true, nothing can be done about it." For many years there was a concerted effort by think tanks, politicians and intellectuals to deny that inequality was increasing in this country. Glenn Hubbard, now chairman of the Council of Economic Advisers, is a highly competent economist; but he demonstrated his fealty during the first Bush administration with a ludicrously rigged study purporting to show that income distribution doesn't matter because there is huge "income mobility" - that is, that this decade's poor are likely to be next decade's rich and vice versa. They aren't, of course. Even across generations there is a lot less income mobility than the folk wisdom about "shirt sleeves to shirt sleeves in three generations" would have it. Mr. Phillips shows that tales of downward mobility in once-wealthy families are greatly exaggerated; the descendants of 19th-century robber barons are still quite different from you and me. But the Gilded Age looked positively egalitarian compared with the concentration of wealth now emerging in America. Pretty soon denial will no longer be possible. What will the apologists say next? First we will hear that vast fortunes are justified because they are the reward for vast achievement. Here's where that table comes in handy, because it tells you what achievements actually get rewarded. Only one of the 10, Tyco's Dennis Kozlowski, has actually been indicted. But of the rest, three - four, if you count John Chambers of Cisco - were Andy Warhol C.E.O.'s: their companies were famous for 15 minutes, just long enough for the executives to cash in their stock options. The list also includes Gerald Levin, who engineered Time Warner's merger with AOL at the top of the Internet bubble; even at the time it seemed obvious that he was trading half his original shareholders' birthright for a mess of cyber-pottage. We'll also hear that in any case nothing can be done to limit the accumulation and inheritance of vast wealth. We'll be told, for example, that reinstating the estate tax would have devastating economic effects - even though the great boom of the 1990's took place with a 55-percent tax on the largest inheritances. I've even been assured by some correspondents that inheritance taxes on the very rich are impractical, that they will always be evaded - this in spite of the fact that in 1999 the estate tax raised about $15 billion from estates worth more than $5 million. But it's not just a matter of collecting taxes. Mr. Phillips, a lifelong Republican, is most concerned not by economics per se but by the political consequences of wealth concentration. He warns that "the imbalance of wealth and democracy is unsustainable, at least by traditional yardsticks." How will this imbalance be resolved? The economists Claudia Goldin and Robert Margo have dubbed the narrowing of income gaps that took place under F.D.R. the "Great Compression"; if I read Mr. Phillips right, he thinks something like that will happen again. But he also offers a bleak alternative: "Either democracy must be renewed, with politics brought back to life, or wealth is likely to cement a new and less democratic regime - plutocracy by some other name." Apocalyptic stuff. But Mr. Phillips has an impressive track record as a political visionary. What if he's right? ------------------------------------- Jim Craven review of "Economics as Religion" (from Marxmail) by Louis Proyect 26 June 2002 19:10 UTC < < < Thread Index > > > "Economics as Religion: From Samuelson to Chicago and Beyond" by Robert H. Nelson, Penn State Press, N.Y., 2001 When I bought this book it was shrink-wrapped to prevent examining its contents prior to purchase. I should have remembered my own axiom: "If it is shrink-wrapped to prevent examination of contents prior to purchase, it is most probably written by some right-wing (usually libertarian) asshole who knows that if the potential purchaser is allowed to examine the likely meager contents prior to purchase, he/she, if in possession of an IQ over 60 and a heart/conscience, will not likely buy it--hence the need for shrink-wrapping." Indeed all of the shrink-wrapped books that I have encountered (Hayek, Friedman, Becker et. al) have all been written by right-wing libertarians who paradoxically scream about "let free markets be free and do what markets do" and "consumer sovereignty" which of course require, according to neoclassical theory, "bounded rationality" (used to be perfect rationality) and [near symmetrical] access to information requisite for "informed [free] choice". The dedication of the book was to Paul Heyne, a hard-core neo-classical/libertarian ideologue who was trained in theology but held a professorship of economics at University of Washington. His training in theology was indeed proper for the metaphysics inherent in the neoclassical paradigm. Indeed that is part of the central thesis of this book: That the core postulates, "axioms" and hypothetico-deductivism of the neoclassicals--and other non-neoclassical paradigms--while purporting to be based on philosophical positivism and dealing only with observable/ operationalizable/ measureable constructs, variables and verifiable/nullifiable hypotheses, are in reality, as metaphysical as any of the core postulates, axioms etc of various religions; they constitute, according to Nelson, "tenets of [an] economic faith". Nelson goes into what he calls "The Market Paradox": methodological individualism and homo oeconomicus, central to neoclassical economics and market processes, when celebrated and played out, may easily create and celebrate forms of criminality, social darwinism, cut-throat/rat-race individualism, fraud, waste, uncorrected negative/positive externalities, gross inequalities in wealth and incomes, rent seeking and other deleterious consequences that erode or call into question the cohesion, social capital, dominant ideologies, trust in markets and whole system itself. As Nelson puts it: "However it might be achieved, a suitable value-foundation for the market should approve the pursuit of self-interest when it is expressed legitimately'--for example in the normal pursuit of business profits in the marketplace. However, there should be a strong social sanction against various forms of opportunistic activity that represent 'illegitimate' expressions of self-interest--for example bribing government officials to deny operating licenses to potential business competitors..." (p2) Nelson, like most neoclassicals and libertarians does not inquire where power comes from and what it is really about.[power, according to the "philosophical positivists" is a non-measurable/operationalizable construct and therefore not worth discussing except by sociologists et al]. As the old saying goes: "The problem with the rich is not so much that they break the laws; the problem is that they write the laws." And of course that means the "power" to define what is legitimate versus illegitimate, legal versus illegal etc. Nelson does not deal with the reality of capitalism that the most socially-deleterious effects of capitalism occur through the nominally "usual" and nominally "legal" processes and relationships of capitalism itself--in the service of the interests of the few oligarchs who write the laws and/or hire [bribe] officials to do so and hire the theoretical priests of orthodoxy to celebrate/rationalize those nominally "usual" and "legal' processes and institutions. Not only does Nelson show how various economic paradigms are essentially metaphysical and theological in nature, he traces various schools of thought to various theological legacies and traditions. According to Nelson: "The greatest figures in the 'Roman' tradition of seeing a rational world that is guided by natural law follow from Aristotle to Acquinas to Adam Smith to the positive economics of the twentieth century. The greatest figures in an opposing 'Protestant' tradition--seeing a sinful and alienated world at present where the powers of human reasoning have been fatally weakened by the general corruption of human nature--follow from Plato to Augustine to Martin Luther to Karl Marx (along with Herbert Spencer and other social Darwinists). He argues that the economics profession is: "the priesthood of a powerful secular religion--or more accurately a set of secular religions, as they have been developed in the theories of leading schools of economics of the modern age. Beneath the surface of their formal economic theorizing, economists are engaged in an act of delivering religious messages. Correctly understood, these messages are seen to be promises of the true path to a salvation in this world--to a new heaven on earth." Nelson goes on to "examine" the "theological messages" in Samuelson, Frank Knight, Friedman, Stigler, Becker, outright caricatures of Marx [the proverbial strawman], the "neo-Institutionalists, etc always with an appeal to return to what Hayek really meant to resolve the "tension" [contradiction] between ultra-individualism/self-interest versus necessary social capital to sanction/manage/facilitate the playing out of "legitimate" self-interest. Here is an example of the "depth" [or severe lack of depth] of Nelson's understanding of Marx: "Marxist economics clearly met Tillich's requirement that a genuine religion must offer a vision of 'ultimate reality'. For Marx everything that happened in the history of the world was controlled by economic laws. Altogether blind to the obvious religious character of his own economic system, Marx said that every form of religious belief is merely a product of a particular economic stage of the class struggle. Echoing this tenet of Marxist faith for example, in the bible of Chines communism, the 'red book', Mao Tse-Tung would say that 'in the general development of history the material determines the mental and social being determines social consciousness..." I guess that this is worth reading. I would recommend not buying it but rather reading a chapter or two on the fly as you go to bookstores to buy the really worthy stuff worthy of being supported. In any case, rip-off the shrink-wrapping of this and all other similarly wrapped books before buying them; Do it for "consumer sovereignty"; Do it for "informed choice"; The high-priests of neoclassical and libertarian orthodoxy will/should understand. Jim Craven ---------------------------------------- According to the Reason Public Policy Institute, in its 2002 16th Annual > Report on Privatization: > > "Criminal investigations are already underway, and markets have already > punished Enron for its lack of transparency and poor disclosure. Investors > large and small will now demand that the "gatekeeper" institutions of our > financial markets -- accounting firms, bondrating companies, company boards > of directors, and regulators like the SEC -- do what they can to promote and > reward transparency and disclosure. Companies failing to meet the > transparency standards that the gatekeepers and the markets require will > have trouble raising capital and will shrink, while companies that provide > accurate information will thrive." > ======= mises en abyme? Tom Walker ------ "Secrecy creates Rents." [Joe Stiglitz] Ian --------------------- 189801 Rainbow Gathering 2002 Capt Kirk 2:18pm Wed Jul 3 '02 (Modified on 6:15pm Wed Jul 3 '02) Possible Armed Action by U.S. Forest Service against prayer circle on 4th of July. Date: 03 July 2002 Bruce Crossing, Michigan Evening showers the night of the 2nd have broken the heat of the last 3 days as the year 2002 Rainbow Gathering continues apace through the steamy afternoon of July 3rd. Gatherers from as far away as Alaska as well as all corners of the country are pouring into the site for the annual "Gathering of the Tribes" as the event is referred to by Rainbow Gathering attendees. The 1st Amendment event has taken place every year since 1972 in a different area of the country and always in the National Forest. On site population estimates as of midday place the number at an unoffical 11,000 with an estimated 4500 vehicles parked alongside Choate Road just outside the front gate. Another 3500 attendees are expected by nightfall. Inside the front gate "bus village" has filled to capacity with every concievable type of bus and van, some beautifully painted and wildly festooned, crammed into every availble space. Happy and content gatherers stroll the main trail among partially or wholly unclothed gatherers within the "clothing optional" event. This years Gathering is not without controversy and arrests as the U.S. Forest Service ramps up its annual enforcement effort to attempt to control and eliminate the event. On July 1st 15 members of "Montana Mud" a camp and makeshift kitchen crewed by Rainbow Gathering attendees were arrested, jailed and cited by Forest Service personnel for "being in a closed area", "resisting arrest", and "failure to obtain a permit for non commercial group use". One of the 15 still languishes in the county jail in nearby Marquette, Michigan for an additional charge of "assault on a Forest Service officer" though it is widely believed that the attendee was assaulted by Forest Service personnel. An additional 30 individuals were cited with the same 3 charges and were released on site. As of today some 2 dozen citations for public nudity have been issued to attendees even though it is a community tradition within Rainbow Gatherings that attendees regularly practice what they refer to as "body acceptance" and Gatherings are traditionally a "clothing optional" event. Most states have statutes which prohibit public nudity but require "offensive intent" on the part of the person who is unclothed as in flashing, mooning or streaking. Skinny dipping in many states is not regarded as breaking the threshold of the statutes. More ominous than nudity citations is the Forest Services's stated intent to shut down the prayer circle of July 4th by force of arms and the Forest Service has refused any and all applications for group use by the gathering attendees. The annual event traditionally culminates on July 4th with a morning of silence and a masive prayer circle for world peace followed by more celebration and music. Because the site suggested by the Forest Service was rejected as unsuitable the attendees opted to move from an initial location to the current location. The Forest Service then demanded that the attendees move to the original site they were ordered off; the Deadman Creek site. Because the Choate site has just been designated as an archeological site by the Forest Service on June 23rd the area has been closed, precipitating the Montana Mud arrests and setting the stage for possible armed confrontation by the Forest Service against the bulk of the prayer circle on the 4th of July. The newly closed area is the only open space within the gathering large enough to hold the projected 15,000 attendees who will join hands to pray for peace. Frantic efforts by attendees to avert such an action by the Forest Service have gone for naught as a request for a temporary restraining order prohibiting the Forest Service from enforcing the closure order was shot down by Michigan Judge Holmes Bell. The judge denied the request because a written brief did not accompany the request to lower court Magistrate Greeley even though the request was filed as an emergency and written briefs would have been prepared and available at the hearing the following day. Many local Michigan residents are perplexed by the closure order and openly scoff at the designation of the old logging camp as "archeological". Within the gathering site old remnants of equipment sit rusting amongst piles of trash and beer cans. Some of the trash has been collected and bagged for recycling by gathering attendees and so far no Forest Service personnel have insisted that the rusting trash remain undisturbed in place as sensitive archeological artifacts. The designation and closure are widely regarded by locals and gathering attendees as a move by the Forest Service to deny access to the land for failure to obtain a group use permit and open defiance of that regulation. Forest Service employees have been distributing flyers to gathering attendees stating that the event is "an illegal gathering" in an attempt to limit attendance. " 'Illegal' is a bit extreme in my opinion", states one attendee, "It is an obscure regulation created by a bureaucrat, not a law enacted by congress. Because of the First Amendment there is no such thing as an 'illegal gathering'." Forest Service Incident Commander Malcom Jowers has stated, "This year, the 4th of July will not be like the 4th of July." Incident Officer Vaughn has stated, "This will be the last gathering." With wild fires raging in the west and Forest Service resources stretched to the limit it is unclear just how much Forest Service personnel resources will be committed to break up the prayer service and arrest the estimated 15,000 attendees. For further information call: Principle @ 906-827-3555 Rm 17, E-mail - add your own comments well thats just fuckin great (english) wideboy 2:42pm Wed Jul 3 '02 comment#189809 then i humbly suggest next years rainbow gathering be held on the washington mall. at least we know that the people really own that swath of grass. pig fucker forest service-put your kneepads back on, the mining and lumber companies are waiting for that daily blow-job. what a crock of shit (english) bs 3:35pm Wed Jul 3 '02 comment#189816 Doesn't the Forest Service have anything better to do than kick the people off their own land? The last gathering? I don't think so. I think they just guaranteed that next year will be the biggest ever. Fascist Forest Service (english) David Ney 6:15pm Wed Jul 3 '02 comment#189843 Yes, the Forest Service and the local pigs in southern Idaho were pulling this bullshit last year, handing out fliers saying that Rainbow was an "illegal" gathering. I can't think of a single year that the state has not interfeared with Rainbow atendees. The reason the state is against the Rainbow family, is that it is a practical example of bio-regionalism, and thus moving us ever closer to "anarchy". The rainbow family holds gatherings despite the state's pressure to keep people out, and there's not a god damn thing that the bastards can do about it. Where are the nation's priorities when people holding a circle for peace are assaulted by armed forest service pigs, and armed police pigs??? If they shut down main circle tommorow with GUNS, is there any question that the US is a militaristic police state? There is no question in my mind. MONTANA MUD - SOLIDARITY!!! KEEP PUSHIN' ON AND DON'T LET THE BASTARDS GET YOU DOWN!!! PEACE!!! -------------------------------