Capitalism Requires World War | The Vineyard of the Saker

by Cathal Haughian

250,000 capitalists read the Financial Times, and it has been our undertaking, since 2010, to chronicle our understanding of capitalism via our book The Philosophy of Capitalism. We were curious as to the underlying nature of the system which endows us, the owners of capital, with so many favours. The Saker has asked me to explain our somewhat crude statement ‘Capitalism Requires World War’.

The present showdown between West, Russia and China is the culmination of a long running saga that began with World War One. Prior to which, Capitalism was governed by the gold standard system which was international, very solid, with clear rules and had brought great prosperity: for banking Capital was scarce and so allocated carefully. World War One required debt-capitalism of the FIAT kind, a bankrupt Britain began to pass the Imperial baton to the US, which had profited by financing the war and selling munitions.

The Weimar Republic, suffering a continuation of hostilities via economic means, tried to inflate away its debts in 1919-1923 with disastrous results—hyperinflation. Then, the reintroduction of the gold standard into a world poisoned by war, reparation and debt was fated to fail and ended with a deflationary bust in the early 1930’s and WW2.

The US government gained a lot of credibility after WW2 by outlawing offensive war and funding many construction projects that helped transfer private debt to the public book. The US government’s debt exploded during the war, but it also shifted the power game away from creditors to a big debtor that had a lot of political capital. The US used her power to define the new rules of the monetary system at Bretton Woods in 1944 and to keep physical hold of gold owned by other nations.

The US jacked up tax rates on the wealthy and had a period of elevated inflation in the late 40s and into the 1950s – all of which wiped out creditors, but also ushered in a unique middle class era in the West. The US also reformed extraction centric institutions in Europe and Japan to make sure an extractive-creditor class did not hobble growth, which was easy to do because the war had wiped them out (same as in Korea).

Capital destruction in WW2 reversed the Marxist rule that the rate of profit always falls. Take any given market – say jeans. At first, all the companies make these jeans using a great deal of human labour so all the jeans are priced around the average of total social labour time required for production (some companies will charge more, some companies less).

One company then introduces a machine (costed at $n) that makes jeans using a lot less labour time. Each of these robot assisted workers is paid the same hourly rate but the production process is now far more productive. This company, ignoring the capital outlay in the machinery, will now have a much higher profit rate than the others. This will attract capital, as capital is always on the lookout for higher rates of profit. The result will be a generalisation of this new mode of production. The robot or machine will be adopted by all the other companies, as it is a more efficient way of producing jeans.

As a consequence the price of the jeans will fall, as there is an increased margin within which each market actor can undercut his fellows. One company will lower prices so as to increase market share. This new price-point will become generalised as competing companies cut their prices to defend their market share. A further n$ was invested but per unit profit margin is put under constant downward pressure, so the rate of return in productive assets tends to fall over time in a competitive market place.

Interest rates have been falling for decades in the West because interest rates must always be below the rate of return on productive investments. If interest rates are higher than the risk adjusted rate of return then the capitalist might as well keep his money in a savings account. If there is real deflation his purchasing power increases for free and if there is inflation he will park his money (plus debt) in an unproductive asset that’s price inflating, E.G. Housing. Sound familiar? Sure, there has been plenty of profit generated since 2008 but it has not been recovered from productive investments in a competitive free market place. All that profit came from bubbles in asset classes and financial schemes abetted by money printing and zero interest rates.

Thus, we know that the underlying rate of return is near zero in the West. The rate of return falls naturally, due to capital accumulation and market competition. The system is called capitalism because capital accumulates: high income economies are those with the greatest accumulation of capital per worker. The robot assisted worker enjoys a higher income as he is highly productive, partly because the robotics made some of the workers redundant and there are fewer workers to share the profit. All the high income economies have had near zero interest rates for seven years. Interest rates in Europe are even negative. How has the system remained stable for so long?

All economic growth depends on energy gain. It takes energy (drilling the oil well) to gain energy. Unlike our everyday experience whereby energy acquisition and energy expenditure can be balanced, capitalism requires an absolute net energy gain. That gain, by way of energy exchange, takes the form of tools and machines that permit an increase in productivity per work hour. Thus GDP increases, living standards improve and the debts can be repaid. Thus, oil is a strategic capitalistic resource.

US net energy gain production peaked in 1974, to be replaced by production from Saudi Arabia, which made the USA a net importer of oil for the first time. US dependence on foreign oil rose from 26% to 47% between 1985 and 1989 to hit a peak of 60% in 2006. And, tellingly, real wages peaked in 1974, levelled-off and then began to fall for most US workers. Wages have never recovered. (The decline is more severe if you don’t believe government reported inflation figures that don’t count the costof housing.)

What was the economic and political result of this decline? During the 20 years 1965-85, there were 4 recessions, 2 energy crises and wage and price controls. These were unprecedented in peacetime and The Gulf of Tonkin event led to the Vietnam War which finally required Nixon to move away from the Gold-Exchange Standard in 1971, opening the next degenerate chapter of FIAT finance up until 2008. Cutting this link to gold was cutting the external anchor impeding war and deficit spending. The promise of gold for dollars was revoked.

GDP in the US increased after 1974 but a portion of end use buying power was transferred to Saudi Arabia. They were supplying the net energy gain that was powering the US GDP increase. The working class in the US began to experience a slow real decline in living standards, as ‘their share’ of the economic pie was squeezed by the ever increasing transfer of buying power to Saudi Arabia.

The US banking and government elite responded by creating and cutting back legal and behavioral rules of a fiat based monetary system. The Chinese appreciated the long term opportunity that this presented and agreed to play ball. The USA over-produced credit money and China over-produced manufactured goods which cushioned the real decline in the buying power of America’s working class. Power relations between China and the US began to change: The Communist Party transferred value to the American consumer whilst Wall Street transferred most of the US industrial base to China. They didn’t ship the military industrial complex.

Large scale leverage meant that US consumers and businesses had the means to purchase increasingly with debt so the class war was deferred. This is how over production occurs: more is produced that is paid for not with money that represents actual realized labour time, but from future wealth, to be realised from future labour time. The Chinese labour force was producing more than it consumed.

The system has never differed from the limits laid down by the Laws of Thermodynamics. The Real economy system can never over-produce per se. The limit of production is absolute net energy gain. What is produced can be consumed. How did the Chinese produce such a super massive excess and for so long? Economic slavery can achieve radical improvements in living standards for those that benefit from ownership. Slaves don’t depreciate as they are rented and are not repaired for they replicate for free. Hundreds of millions of Chinese peasants limited their way of life and controlled their consumption in order to benefit their children. And their exploited life raised the rate of profit!

They began their long march to modern prosperity making toys, shoes, and textiles cheaper than poor women could in South Carolina or Honduras. Such factories are cheap to build and deferential, obedient and industrious peasant staff were a perfect match for work that was not dissimilar to tossing fruit into a bucket. Their legacy is the initial capital formation of modern China and one of the greatest accomplishments in human history. The Chinese didn’t use net energy gain from oil to power their super massive and sustained increase in production. They used economic slavery powered by caloric energy, exchanged from solar energy. The Chinese labour force picked the World’s low hanging fruit that didn’t need many tools or machines. Slaves don’t need tools for they are the tool.

Without a gold standard and capital ratios our form of over-production has grown enormously. The dotcom bubble was reflated through a housing bubble, which has been pumped up again by sovereign debt, printing press (QE) and central bank insolvency. The US working and middle classes have over-consumed relative to their share of the global economic pie for decades. The correction to prices (the destruction of credit money & accumulated capital) is still yet to happen. This is what has been happening since 1971 because of the growth of financialisation or monetisation.

The application of all these economic methods was justified by the political ideology of neo-Liberalism. Neo-Liberalism entails no or few capital controls, the destruction of trade unions, plundering state and public assets, importing peasants as domesticated help, and entrusting society’s value added production to The Communist Party of The People’s Republic of China.

The Chinese have many motives but their first motivation is power. Power is more important than money. If you’re rich and weak you get robbed. Russia provides illustrating stories of such: Gorbachev had received a promise from George HW Bush that the US would pay Russia approximately $400 billion over10 years as a “peace dividend” and as a tool to be utilized in the conversion of their state run to a market based economic system. The Russians believe the head of the CIA at the time, George Tenet, essentially killed the deal based on the idea that “letting the country fall apart will destroy Russia as a future military threat”. The country fell apart in 1992. Its natural assets were plundered which raised the rate of profit in the 90’s until President Putin put a stop to the robbery.

In the last analysis, the current framework of Capitalism results in labour redundancy, a falling rate of profit and ingrained trading imbalances caused by excess capacity. Under our current monopoly state capitalism a number of temporary preventive measures have evolved, including the expansion of university, military, and prison systems to warehouse new generations of labour.

Our problem is how to retain the “expected return rate” for us, the dominant class. Ultimately, there are only two large-scale solutions, which are intertwined. One is expansion of state debt to keep “the markets” moving and transfer wealth from future generations of labour to the present dominant class. The other is war, the consumer of last resort. Wars can burn up excess capacity, shift global markets, generate monopoly rents, and return future labour to a state of helplessness and reduced expectations. The Spanish flu killed 50-100 million people in 1918. As if this was not enough, it also took two World Wars across the 20th century and some 96 million dead to reduce unemployment and stabilize the “labour problem.”

Capitalism requires World War because Capitalism requires profit and cannot afford the unemployed. The point is capitalism could afford social democracy after the rate of profit was restored thanks to the depression of the 1930’s and the physical destruction of capital during WW2. Capitalism only produces for profit and social democracy was funded by taxing profits after WW2.

Post WW2 growth in labour productivity, due to automation, itself due to oil & gas replacing coal, meant workers could be better off. As the economic pie was growing, workers could receive the same %, and still receive a bigger slice. Wages as a % of US GDP actually increased in the period, 1945-1970. There was an increase in government spending which was being redirected in the form of redistributed incomes. Inequality will only worsen, because to make profits now we have to continually cut the cost of inputs, i.e. wages & benefits. Have we not already reached the point where large numbers of the working class can neither feed themselves nor afford a roof over their heads?13% of the UK working age population is out of work and receiving out of work benefits. A huge fraction is receiving in work benefits because low skill work now pays so little.

The underlying nature of Capitalism is cyclical. Here is how the political aspect of the cycle ends:

1920s/2000s – High inequality, high banker pay, low regulation, low taxes for the wealthy, robber barons (CEOs), reckless bankers, globalisation phase

1929/2008 – Wall Street crash

1930s/2010s – Global recession, currency wars, trade wars, rising unemployment, nationalism and extremism

What comes next? – World War.

If Capitalism could speak, she would ask her older brother, Imperialism, this: “Can you solve the problem?” We are not reliving the 1930’s, the economy is now an integrated whole that encompasses the entire World. Capital has been accumulating since 1945, so under- and unemployment is a plague everywhere. How big is the problem? Official data tells us nothing, but the 47 million Americans on food aid are suggestive. That’s 1 in 7 Americans and total World population is 7 billion.

The scale of the solution is dangerous. Our probing for weakness in the South China Sea, Ukraine and Syria has awakened them to their danger.The Chinese and Russian leadershave reacted by integrating their payment systems and real economies, trading energy for manufactured goods for advanced weapon systems. As they are central players in the Shanghai Group we can assume their aim is the monetary system which is the bedrock of our Imperial power. What’s worse, they can avoid overt enemy action and simply choose to undermine “confidence” in the FIAT.

Though given the calibre of their nuclear arsenal, how can they be fought let alone defeated? Appetite preceded Reason, so Lust is hard to Reason with. But beware brother. Your Lust for Power began this saga, perhaps it’s time to Reason.

Cathal Haughian Bio:

I’ve spent my adult life in 51 countries. This was financed by correctly anticipating the Great Financial Crisis in 2008. I was studying Marx at that time. I’m presently an employee of the Chinese State. I educate the children of China’s best families. I am the author, alongside a large international team of capitalists, of Before The Collapse : The Philosophy of Capitalism.

I also have my own business; I live with my girlfriend and was born and grew up in Ireland.

Vend from Canada on March 01, 2016 · at 4:27 pm EST/EDT

Beautiful analysis. May I add that in times of inequality we have lot of poverty, and poverty leads to population increase. That is a natural thing; we are nothing but boxes for genes, to make it worse, intelligent ones. And what is it that genes do – try to multiply, and pass its blueprint to the future generations.

In good times, being intelligent species, we figure out that our chances of passing genes are higher if we focus energy and resources to smaller number of offspring. In tough times, it is not certain that focusing energy and resources to a smaller number of offspring. The natural response is – procreate as much as possible, with hope that some will survive. It is evident that somehow number of births is higher than number of deaths, hence, overpopulation, especially in poor countries. How come? The general progress makes even lives of poor a bit more bearable than in the past. For example, a poor peasant from India in 2015 has better chances of survival and escape from absolute poverty to than a poor city dweller of Charles Dickens time England. Hence, the slow, or not so slow, increase in population. This leads to over-pressure on available resources, and the vicious circle goes on and on. More poor people = more potential slaves, who are not called slaves, they believe they are free, and are happy to work for low wages, and, as the article says, are willing to give up their comforts in order to enable the offspring with better chance in the future.

I have heard many times (I live in Canada) people saying “poor countries have to stay poor, if they don’t, their standard of live would rise and they would be consuming more of everything, and given their numbers, we would be all doomed”. Simply not true, but useful in preserving status quo. My both grandfathers had 7 siblings each. The all survived. Each of 14 siblings had no more than 2 kids – my parents had 1 sibling each. In one generation average number of siblings per family dropped from 14 to almost 2! generation of my parents had mostly 2 kids, with only one here and there, less than ‘almost 2 ‘ per family per family. My generation has equal number of families with 2 and with one kid, some have no kids at all, resulting in average 1.3 kids per family. It has nothing to do with ‘cultural’ factors. Where I come from, it was considered a cultural thing that Muslim families have 4-5 kids, in my generation. Christians had 1-2. All my grandparents were christian, yet they had 7 siblings each, at the time (end of 19th and beginning 20th century) when life was much more difficult than one or two generations later. We lived in a socialist country and economic inequalities were reduced very quickly. In my generation (born 19060-65), both Muslims and Christians have the same number of kids per family – more than one, less than 2. It was also a common assumption, right or wrong, that Albanians living in the country were mostly “primitive., living in feudal overly religious extended families” and because of that they had many children, even in my generation. However, some of them escaped from extended families, went to work in Germany and Switzerland, (wives stayed home with children) and were able to afford individual houses and standard of living similar if not higher than surrounding Slavic population. At the beginning the drill was this: work yourself almost to death on bauchtell (construction site) in Germany, once a year come home, make another baby and so for several years. Very soon the situation changed – the ladies refused to be just a child bearing machines, and number of kids for urbanized Albanians dropped to – more than one, less than 2 per family!

This is just my observation, but the numbers of kids per family are strikingly close to official statistics. Which leads to conclusion – poverty leads to many children, good life leads to much less. Since the ratio (at least in my family) was 8:2 = 4 in 3 generations, from rural pre industrial to urban post industrial, if we allowed most of the poor countries to mind their own business and develop in peace, from current 8 billion people Earth’s population would drop to 8:4 = 2 billion people, in 1 or two generations. The ecology would recover and the life would be rather bearable affair. No need for HIV, Ebola and Zika to control the population, since the birth rate will go up no matter what, it is natural response of living organisms to worsening conditions for survival. If we stay on current course, soon we will regret that humans (Euro-Asiatic at least, mostly Euro, of western type) discovered agriculture and whatever followed from that.

let’s hope the capitalism destroys itself before it destroys the Earth. maybe I should have posted this on Club Orlov….

Cheers, Vend from Canada

302 Comments

nmb on March 01, 2016 · at 2:24 pm EST/EDT

The neo-colonial booming industry of private mercenaries

http://bit.ly/1LkQfY1
isw on March 01, 2016 · at 2:54 pm EST/EDT

Very interesting Cathal, thanks for your effort in producing this analysis.
- Cathal on March 01, 2016 · at 3:51 pm EST/EDT
  
  Your Welcome. I’m happy you enjoyed it.
  - Anonymous on March 01, 2016 · at 7:25 pm EST/EDT
    
    @”Capital destruction in WW2 reversed the Marxist rule that the rate of profit always falls.”
    
    That is wrong. It is called “tendency[!] of the rate of profit to fall”.
    https://www.marxists.org/archive/marx/works/1894-c3/ch13.htm
    
    @”Capitalism requires World War because Capitalism requires profit ”
    
    Indeed.
    
    “Hitler’s American Business Partners”
    https://www.youtube.com/watch?v=SMKnH2BlkBA
  - reflector on March 03, 2016 · at 7:56 am EST/EDT
    
    cathal,
    
    my impression when i read your writing, is that you either don’t understand what capitalism is, or are deliberately obfuscating, purposely conflating capitalism with corporatism, which are 2 totally opposite concepts.
    
    capitalism is free and voluntary exchange in the marketplace, free of coercion and violence.
    
    particularly unfortunate is this statement:
    “If Capitalism could speak, she would ask her older brother, Imperialism, this:”
    
    imperialism is not an “older brother” of capitalism, imperialism is the angry, disfunctional, alcoholic uncle of capitalism.
    
    like all true capitalists, i recognize that imperialism, and all forms of state-sponsored violence, are an affront to human dignity, and are not compatible with capitalism.
    
    and i look forward to the day when imperialism and all of the violence of the state, is laid to rest in the grave, and regarded as a relic of an uncivilized era, much like we view slavery today.
    - Jason Calley on March 03, 2016 · at 6:12 pm EST/EDT
      
      Reflector, thank you for posting your comment. You have saved me the effort of saying the same thing. Yes, capitalism is not corporatism — just as consensual sex is not rape. Capitalism is a voluntary relationship among actors who each agree to voluntary transactions that will benefit them all. What currently passes for “capitalism” is actually a system where some groups have seized the power of the state and uses it to coerce people into non-voluntary transactions.
      
      If one were to take this article and replace all uses of “capitalism” with “corporatism” or “mercantilism” or even “fascism” it would be much closer to the truth and a source of much real and valuable insight. That said, thank you also, Cathal. for a very well written article!
      - Cathal on March 04, 2016 · at 10:21 am EST/EDT
        
        You’re welcome, capitalism is a malleable system so it’s difficult to define well. For this essay we can define capitalism as ‘the private profit motive.’ And so, we can see the Powers That Be, altering the rules to suit their pocketbook and political agenda, over the last century.
        Best,
        Cathal
        
        Andrew on March 07, 2016 · at 10:23 am EST/EDT
        
        Hi Cathal,
        
        Well thought out article however I am with Jason here.
        
        Oxford dictionary and most others describes capitalism as “an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state”.
        
        What you have described is when individuals (you call them The Powers That Be (and I think you imply these are capitalists whereas they are probably better described as the wealthy elite or influential business men) have taken over control of the state. So the state controls – this is the opposite of capitalism.
        
        Apart from what I and many others believe to be a misunderstanding of the nature of capitalism, your article is on mark.
        
        Most free market capitalists loathe this “crony capitalism” you outline as much as Marxists do; however, they pose a different solution. Rather than socialising everything which would seem to double down on the problem, they suggest a libertarian approach of removing the coercion and aggression of the state. The reality is that hundreds of millions of people have been murdered by Marxist regimes in the pursuit of nirvana (why doesn’t anyone talk about this? Why are there no Hollywood movies made?) so perhaps we need a better idea. One without violence.
        
        Capitalism is a difficult concept for many to envision as we haven’t seen anything approaching what a purist would call capitalism since the formation of the United States over 200 years ago. The altering of the rules you describe started from almost immediately after confederation and really took off after 1913. Today the state regulates just about everything yet we keep complaining about how terrible our free market economy is. Take a closer look – look at what actually happens rather than what they tell us happens – it’s not even close to a free market. We are far closer to totalitarianism.
        
        Unfortunately I agree with you that war is inevitable when TPTB capture the power (and guns) of the government. Note that when we choose to pursue ends (no matter how well-intentioned) through government (and that means with “aggression”) it’s only natural that the worst elements of society would look to capture that aggression as a short cut to gain advantage rather than going down the more difficult capitalist path of producing things that others value and profiting from voluntary trade (see Mary Rupert for a compassionate explanation of how aggression backfires on the poorest amongst us).
        
        I no longer believe that the cause of violence is “capitalism” – the cause clearly appears to be “government” or “state” – the polar opposite of capitalism – which holds the monopoly on violence and sees fit to enslave it’s citizens to conduct mass murder for it. Albert Einstein: “Nothing will end war unless the people themselves refuse to go to war.”
        
        It saddens me that the propaganda drives the little guys (business owner and employee) to point the finger at each other and cause each to try to wrest the force of government to gain advantage.
        
        I am an employee not a business owner. Like all employees I have entered voluntarily into an employment contract with my employer. I like many believe that my employer gets more value from me than what I am paid… this is no problem but rather a requirement of my employment. If one day a better offer comes up or I find myself in a position to run my own thing then I am free to move on.
        
        I pine for a day where we can just all get along, leave people alone, don’t force others to do what they don’t want to do. It won’t be perfect (nothing ever is) but it will be much better that what we have now.
        
        Frédéric Bastiat in the mid-nineteenth century, “Government is the great fiction, through which everybody endeavours to live at the expense of everybody else.”
        
        PS: for those who are worried about the loss of all those services government provides, smart and non-violent people have come up with non-violent solutions (I encourage you to do your own research as this is something I feel you need to do for yourself because you have decided that aggression is just not a mature and ethical way to get things done)
    - Any Mouse on March 05, 2016 · at 4:02 pm EST/EDT
      
      The one who deconstructed Capitalism was Karl Marx in Das Kapital.
      
      And because of Marx’s definition of “work” the Ordo Liberals of the Freiburg School had to start inventing a new ideology in the 1920’s – Neoliberalism.
      
      What killed Liberalism was the definition between “concrete work” and “abstract work”.
      
      * Abstract work = the usual working day/week – 8h/40h.
      
      * Concrete work = all time spent on work that we otherwise would spend on things else:
      – 1h lunch
      – 1,5-2h average commuting door to door
      – 0,5h nap because you’re exhausted
      – No socializing over at a friends house on weekdays because of early mornings, etc…
      
      “Concrete work” thus = 11-11,5h working day + further violated “freetime”/life.
      
      The polar opposite of (Your) “freetime” is unfree time, and thus work equals slavery – by Capitalist definition.
      
      So much for understanding Capitalism (write a book that will kill Neoliberalism and only then your word will be equal to Karl Marx’s). As for your other argument:
      
      Imperialism = material, institutional and humanitarian gains through geographic conquest.
      
      Capitalism = material, institutional and humanitarian gains through “economic” conquest.
      
      Neither Imperialists nor Capitalists are human-centric rather they are respectively Imperial-centric and Capital-centric.
      
      A humanoid that is not human-centric is centered on something opposite to human, and is thus by definition anti-human (anti = opposite).
      
      That’s the definition of “The Capitalist”.
      
      Now, an argument must also correspond to the world as we know it, so what is it that makes the world go around? “Growth” and “sutainable growth” not of humans but of capital, the System that rules the world and around which everything revolves is Capitalism and its anti-human consequences are to be seen everywhere.
    - Adam 3 on June 18, 2017 · at 1:41 am EST/EDT
      
      What you call Capitalism is Anarchy in the correct use of the term. Capitalism is where Capital (cattle counting) supersedes social valuation. Corporatism is where private ownership controls government.
- Frank on March 03, 2016 · at 3:59 am EST/EDT
  
  Not really all that interesting. Every economic ‘ism that has ever been tried has never prevented nations from going to war. That is because every government that have ever been created, feeds on the wealth their citizens create. How the wealth they feed on gets created and is held by its ctizens is up to the ‘ism they embrace. Capitalism is so far the best wealth creation engine for creating wealth for government to feed on that has been created thus far. Heck even most communists and socialists understand this now. However, as always is the case of every government that has ever existed, there comes a point where its not enough. The government’s of the world today are starved for wealth which will ultimately lead them to war. This is nothing new, has zilch to do with profit or Capitalism or any other ism such as Communism, Mercantilism, Socialism, Feudalism, etc.
  - RockyRacoon on March 03, 2016 · at 7:07 am EST/EDT
    
    IF you want to understand today’s reasons for war and prevent them you have to analyse them through this world historical moment of global capitalism. Without this specificity, your analysis is worthless.
    RR
    - Frank on March 03, 2016 · at 5:10 pm EST/EDT
      
      Not sure why you are so hung up on the ‘ism, however, If any ‘ism is least likely to lead to global war, its global capitalism provided that there is a free flow of capital among the economic super powers. World war makes no economic sense for any of the major economic super powers when there is so much cross investment by their citizens and businesses among their economies. Where the risk of global war among them rises is when nations restrict the flow of capital or close off a major economy to the global markets. When this happens these economies ultimately become starved for wealth to confiscate and once they confiscate what they can from their people (without creating a revolution), they have to look outside their borders. This has been demonstrated throughout history. So long as we live on a planet of nations with natural resources unequally distributed among them, trade among them is necessary for their survival. Thus a global economy will always exist and the risks of war, regardless of what the ‘ism is, will exist as well. The only way you can prevent war is to keep trade flowing and as fair as possible. This is what makes guys like Sanders and Trump so dangerous, if we are to take their economic trade plans/ramblings at face value.
Anonymous on March 01, 2016 · at 3:09 pm EST/EDT

The writer of this article makes clear to me that they don’t know what capitalism is. Your talking about State monopolys. Capitalism is not the same as state monopolys and distortions of the market. for anything to be capitalism its got to be only in the dealing with privet property and state property is not the same as privet property. State property is not owned by an individual its owned by the state. Even though they may says oh no we all own that property or all the people, the public owns that property, that right there is not true. This is why theres so much war. People don’t actually control their so called property the government tells them is there because in fact they don’t.

What the state is is just state monopoly of government and of the services and schema its wishes to make up by suckering the layman into giving them their power that is rightly theres and not the states.
- waterwithoutsound on March 01, 2016 · at 4:53 pm EST/EDT
  
  Merka is the world’s top captialist and the world’s biggest war-maker. Explain that genius.
  - Siotu on March 01, 2016 · at 5:51 pm EST/EDT
    
    Agree. This is a poor piece which does nothing to describe what Capitalism is and how it operates. For a start the author might have made an honest attempt to describe Capitalism and exactly what principles it presupposes. At the very least he could have made the attempt to described what he thought it was. That he did neither speaks volumes.
    
    Siotu
    
    PS waterwithoutsound, the USA is more socialist and Keynesian than Capitalist.
    - Purple Library Guy on March 01, 2016 · at 9:26 pm EST/EDT
      
      It is you and the others complaining who do not seem to understand what capitalism is or how it operates. So, capitalism 101 here. The great myth that deceives many people is the notion that capitalism is about markets. It is not. There can be markets without capitalism, and there can be and very often is capitalism without markets. Current monopolists are far from an anomaly, such things have been common since the industrial revolution began.
      
      What capitalism is about, is capital. Also wage labour. Capital is stuff owned by private individuals which can be invested in order to employ labour to produce things in return for wages. The things get sold for more than the cost of producing them (particularly, for more than the labourers are paid). The things need not be physical, they could be “intellectual property” or financial instruments or whatever.
      The extra, the surplus, is new capital which can be invested. Thus, the process is one involving growth. And the point of it all is to make the capitalist as rich as possible–for the amount of capital they own to continue growing. That is capitalism. Competition is not necessary. Markets, in the sense of any kind of open opportunity to buy or not buy, are not necessary; monopolist, regulated utilities are still run by capitalists, private individuals who own the capital and seek a return on the investment of that capital by paying people to generate it. Defence contractors who “sell” solely to the government based on untendered, single-source, cost-plus contracts are also capitalists. Owners of privatized prisons, and on and on and on, still capitalist. The British East India Company, with a crown-granted monopoly on trade with India, was still capitalist.
      
      On the other hand, an economy in which all the productive facilities were co-operatives owned by the people who worked at them, and which then competed amongst themselves in otherwise familiar “free” markets, would not be capitalist. It would not IMO be ideal, but it would not be capitalist.
      
      So the principle of capitalism is to make as much money as possible by paying workers wages which are less than the worth of what they produce (ideally no more than the minimum they need to survive). Without that difference, that surplus, which the capitalist owns and controls but the workers do not, capitalism does not exist. Without the capital (such as a factory or web portal) which again the capitalist owns and controls but the workers, the state, feudal nobles, Ayatollahs and so forth do not, capitalism does not exist. Those are what capitalism is about.
      
      Capitalists capturing the state and making it do what they want is something which has always been present in really existing capitalism; you pretty much need a state to guarantee the process of capitalism that I described will keep on happening. Someone has to be there to say the capitalist owns all this stuff and you do not, like say passing laws that say commonly owned lands now belong to private individual capitalists.
      - Anonymous on March 02, 2016 · at 10:26 am EST/EDT
        
        The title that Capitalism requires world war or war is just false. Its actually the opposite. War distorts the markets thereby making it even more risky for investors with capital to invest. A good example would be the instability the current wars and proxy wars is having in the middle east, Russia and all around the world. Russia would have a much better time attracting investors if the middle east weren’t so unstable. However, Russia still has decent amount of attractiveness because Putin is a brilliant leader that has done a good job in terms of military operations and keeping Russia more stable then lets say the US.
        
        I would like to say as well though the leaders like Putin are a very rare thing. I worry alot that sense people like him are so rare then what will happen when he is not with us anymore? I’m an Anarcho-capitalist that believes in a privet law society by the way. :]
        
        Siotu on March 03, 2016 · at 8:10 pm EST/EDT
        
        Mr Anonymous
        
        I concur.
        
        Siotu
      - RR on March 03, 2016 · at 7:18 am EST/EDT
        
        Wage labour is also capital. Marx terms labour as variable capital and is based on certain social relations. Private ownership of property and “free” wage labour. The serf’s were “freed” from their motley feudal ties and the commons to accommodate the new rising class of Bourgeoisie.It is considered variable as living labour ( variable capital) as conscious beings attempt to better their lot. The egalitarian impulse generated by the need for communal living has never been snuffed out of humanity as for millions of years it was necessary for our survival and still is. Humans are after all social beings above all else. Most pathologies are caused by individualism.
        RR
      - reflector on March 03, 2016 · at 8:04 am EST/EDT
        
        absolutely incorrect:
        “There can be markets without capitalism”
        if there is a market, then there is capitalism
        
        you make some very strange claims.
        
        all the way down to:
        “Capitalists capturing the state and making it do what they want”
        in capitalism, there is no state. if someone is “capturing the state” then they are not capitalists.
        corporations taking control of the violent apparatus of the state is called corporatism or cronyism or fascism.
        
        Purple Library Guy on March 03, 2016 · at 6:20 pm EST/EDT
        
        reflector, that’s all very fine, but in that case we have to say there is no such thing as capitalism and there never has been any such thing as capitalism–it’s a hypothetical construct, a notion of “what if this were possible”. And then all the stuff anyone has ever said about capitalism operating in the real world, we have to go back and restate it as being about “corporatism” or whatever.
        
        As to the idea that there can’t be markets without capitalism . . . Look, I realize that people these days have very limited understanding of history, but there are limits. There have been markets since the Bronze age at least. There has been capitalism since the 17th century or so. Trying to insist that markets and capitalism are the same thing is, first, incoherent, and second, marks you as someone who really doesn’t know enough to be in the discussion.
        
        People have never known anything except work for wages being the main event, so they don’t realize that there was a time when that was quite rare. In feudal europe there were a few kinds of people. There were peasants, the majority. The peasants didn’t work for wages, they farmed, paid taxes to their lord mainly in kind (chickens, flour, beeswax and so on). There were aristocrats who lived by taxing the peasants and beating up anyone who talked back. There were craftsmen, who were independent or belonged to guilds, and who didn’t mostly work for wages–they owned their own shop and tools, and lived from selling their wares. There were people working directly for aristocrats, men at arms, craftspeople, seamstresses, all kinds–but mostly for room and board and clothes and rank-dependent perks; there might be a bit of money in there somewhere, but it wasn’t central to the relationship. There were merchants, some of whom eventually turned into capitalists, but they were a tiny minority and the aristocrats stepped on them if they got uppity.
        What made you important in those days? Not how much money you had. It was how many people you had. If an aristocrat had a lot of gorgeous tapestries, it was because they had a lot of farmers paying taxes in flax or wool or such, and in their castle/s they had a lot of women spinning and weaving and dyeing and embroidering. But your relationship with these farmers and women was not an employment relationship–it was a permanent relationship; each side had responsibilities which they could not just terminate on a whim.
        So this was not capitalism. But there were markets. Peasants sold some of what they produced at market, and bought things they needed but couldn’t produce, as well as luxuries. Craftsmen bought things from peasants and merchants. Merchants traded internationally, guild craftspeople sold some of what they produced to those merchants to be traded internationally. Shippers took loans to get cargo, and so on and so forth. There are obviously markets without capitalism. One pretty much has to be, literally or spiritually, from the United States of Amnesia to imagine otherwise.
      - Siotu on March 04, 2016 · at 7:55 pm EST/EDT
        
        Purple
        
        Well, you’ve certainly demonstrated an ability to recite Marxist theology by rote. That’s all very nice. The trouble is that it is counterfactual and long since demonstrated as such. Actually, it is all a pile of despicable nonsense. It is amazing after all these years of demonstrated failures, violence, destruction and impoverishment that anyone believes there is good in it at all.
        
        As the saying goes, Marx was all mouth and no trousers. Apart from being a non-productive and somewhat unhygienic layabout leeching from the people around him (a mouth screaming to be fed), he was a fraudster (a mouth screaming nonsense) engaging in promoting fantasies which he could (and did) employ to excuse his nature as a person and to enable his toxic behaviour. The man was a destructive personality and worse.
        
        Something to consider. Just because the words “Capitalism” and “capital” look similar, that does not mean they indicate the same concept. Best avoid this confusion.
        
        The term “surplus capital” refers to a non-existent. It is but one of Marx’s many wee frauds. “Profit”, on the other hand, can exist under certain circumstances (as can loss). Profit is not of itself “new” capital. It may be reinvested back into an activity and utilised as capital. Equally it may be consumed. Indeed, its use may be deferred when it is simply put aside and saved. Profit does not demand growth or increase of the size and scope of a business or an activity. For example, I am aware of colleagues who have traded in business for many years whose businesses have not increased in size or scope. They are and remain profitable. Similarly, that businesses or individuals exist that are generating profit does not imply a requirement of a growing economy.
        
        Consider what it is that economists (or academics or government) refer to when they state that an economy is growing. Most often it is an aggregate measure such as GDP. Most often the unit of measure is a currency unit. Check to see what their assumptions are. Is the amount of currency fixed or has it been inflated? If it has been inflated, who by and with what effects? Does this means of increasing the GDP total reflect reality? Does an increase in GDP from this source report real increase in productive activity? Is government spending included in the aggregate? If so, why? How can it be that direct expropriation and consumption of production from a population be properly added to the GDP total? Finally, is the use of aggregates (such as GDP) a valid approach in attempting to understand how an economy is operating?
        
        Re Capitalism 101
        To understand what Capitalism is toss out Marx’s nonsense. His approach was not an accurate one (nor was it honest). Still, if it is Marx you insist on studying, check very carefully his premise and where he got his ideas. On the other hand, if it is Capitalism you wish to understand then there are plenty of excellent texts which summarise it far better than can I here. I would be happy to post a few titles and authors worthy of consideration should you be seriously interested.
        
        Siotu
  - Diaspora_M on March 01, 2016 · at 5:59 pm EST/EDT
    
    I’ll take a shot at it. ‘Merica isn’t a Capitalist state. It is Corporatist, what more astute people call Fascist. They call themselves capitalist because to admit to a change in policy would be to depose themselves. That transition began under the administration of Woodrow Wilson although the seeds were planted during Teddy Roosevelt’s day.
    
    So just because someone calls themselves something doesn’t mean that its true. Much like how the Ukrainians believe themselves not to be Nazis politically speaking doesn’t make them not so.
    - waterwithoutsound on March 01, 2016 · at 6:31 pm EST/EDT
      
      Capitalism to the max! There was no transfer of power from capitalists to corporatists or fascists. Just more of the same. Different names, same shit. Profit is all, served up with copious crocodile tears.
      - Diaspora_M on March 01, 2016 · at 8:16 pm EST/EDT
        
        Capitalism isn’t a philosophy its an open Market place. Corporatism (fascism lite) is a protophilosophy where corporations are empowered by government to stifle competition and create monopolies that create a vicious cycle that leads to Military Industrial Complexes and the like which justify themselves with agitation for war.
        
        Your statement is the equivalent of calling some poor Romanian a slave holding racist just because his skin color is the same as the anglo saxons who owned slaves in the American south. Doesn’t tread water with a thinking man.
        
        Anonymous on March 03, 2016 · at 7:20 am EST/EDT
        
        That is where competition and capitalist crisis takes you. Increasing concentration of wealth in fewer and fewer hand and in modern society the need to police the overhead. Fascism and war.
        RR
        
        Anonymous on March 03, 2016 · at 1:46 pm EST/EDT
        
        Corporatism is a phase or variant of mature capitalists societies.
      - reflector on March 03, 2016 · at 7:23 am EST/EDT
        
        to say that capitalism and corporatism(fascim) are “different names, same shit” reveals your complete ignorance.
        they are, in fact opposites.
        in capitalism, there is voluntary exchange in a free and open marketplace.
        in corporatism, there is state-sponsored violence in a naked grab for power and control.
- Purple Library Guy on March 01, 2016 · at 5:57 pm EST/EDT
  
  Wait, wait . . . he didn’t say anything about state monopolies. He said “monopoly state capitalism”, by which as near as I can make out he means something like “capitalism in which the most powerful capitalists arrange for the state to help them get and keep monopolies so they can reap monopoly rents”.
  You are mesmerized by the word “private”, as if economics and politics were some kind of hermetically sealed-off separate spheres, one full of capitalists making money, the other full of governments, politicians and bureaucrats, and never the twain shall meet. The world doesn’t work like that; the impression that it does is not just a mistake, it is propaganda: The study of the two as an intertwined whole under the name “political economy” was once the dominant approach, but it has been fairly systematically eliminated because it let people notice too much.
  
  The reality is that the economy and politics are intertwined; the economy works in good part the way politics shapes it to work, and in our system politics shape it to work the way capitalists want it to. In a capitalist system, government is mostly an arm of capital which does their bidding. The “private” in private property merely means that those in charge don’t have to take responsibility for being there, because their property is “private”. The government is a sort of deniable asset for capitalists, which they use against the public much the way the US uses “colour revolutionary” groups against countries.
  
  Unfortunately for both us and them, what they want is for the economy to simultaneously operate at top speed, and give them, the tiny minority, all the money and all the wealth in it with nothing for the rest of the population. They want to sell all the stuff and they want nobody to have the money to buy it. These two things cannot ultimately happen at the same time, which leads to crises.
- Weston on March 01, 2016 · at 5:58 pm EST/EDT
  
  +1 But you can’t expect from a marxist ideologist an essay about how market is benefitial to regular people.
  
  The author calls the people who control the USA capitalists, but they rather are feudalists, moneychangers and imperialists with absolute power. All these groups misuse The State which instead protecting people is murdering them in wars.
  
  This essay is a prime example when ideas got mixed and the author has a total bias toward a single ideology ignoring the rest.
  Beside that, marxism was created by Jews in Germany as an ideology to be used to destroy Russia and China.
  
  And eventually, the author works for China’s government which is more capitalistic than anything else on this planet. Btw, owning a small business is capitalistic as well, the author should close it as it’s against the ideas he presents here.
  - Anonymous on March 01, 2016 · at 7:04 pm EST/EDT
    
    According to the book The Creature from Jekyll Island, the United States, Britain, and Germany helped to finance and back the Bolshevik Revolution to overthrow the Russian tsar government… and the rest is history, as they say.
    
    From:
    “Chapter 13 – MASQUERADE IN MOSCOW
    
    One of the greatest myths of contemporary history is that the Bolshevik Revolution in Russia was a popular uprising of the downtrodden masses against the hated ruling class of the Tsars. As we shall see, however, the planning, the leadership and especially the financing came entirely from outside Russia, mostly from financiers in Germany, Britain and the United States. Furthermore we shall see, that the Rothschild Formula played a major role in shaping these events.
    
    […]
    
    ROUND TABLE AGENTS IN RUSSIA
    
    In Russia prior to and during the revolution there were many local observers, tourists and newsmen, who reported, that British and American agents were everywhere, particularly in Petrograd, providing money for insurrection. On report said, for example, that British agents were seen handing out 25-rouble notes to the men at the Pavlovski regiment just a few hours, before it mutinied against its officers and sided with the revolution. The subsequent publication of various memoirs and documents made it clear, that this funding was provided by Milner and channeled through Sir George Buchanan, who was the British Ambassador to Russia at the time. (See de Goulevitch, p. 230) It was a repeat of the ploy, that had worked so well for the cabal many times in the past. Round Table members were once again working both sides of the conflict to weaken and topple a target government. Tsar Nicholas had every reason to believe, that since the British were Russia’s allies in the war against Germany, British officials would be the last persons on Earth to conspire against him. Yet the British Ambassador himself represented the hidden group, which was financing the regime’s downfall.
    
    The Round Table Agents from America did not have the advantage of using the diplomatic service as cover and therefore had to be considerably more ingenious. They came not as diplomats or even as interested businessmen, but disguised as Red Cross officials on a humanitarian mission. The group consisted almost entirely of financiers, lawyers and accountants from New York banks and investment houses. They simply had overpowered the American Red Cross organization with large contributions and in effect purchased a franchise to operate in its name.”
    
    If true, these events bring up a profound question: was the British/American/German overthrow of Russia through the Bolshevik Revolution an example of what today would be called a Color Revolution or regime change operation?
    - Anonymous on April 16, 2017 · at 5:48 pm EST/EDT
      
      https://en.wikipedia.org/wiki/Antony_C._Sutton
      - Franz on April 16, 2017 · at 7:09 pm EST/EDT
        
        I think of the ‘Red Revolution’ in 1917 as an early prototype of the Blue and Yellow ‘revolution’ in The former The Ukraine and done by the same people who, having dusted off the old, forgotten plans, are now bringing us ‘color revolutions’ globally. I wonder if you would agree?
  - Purple Library Guy on March 01, 2016 · at 8:31 pm EST/EDT
    
    “The author calls the people who control the USA capitalists, but they rather are” . . . the same people who have been called capitalists since the term was invented.
    You’re running into the same problem, only even more so, as the people who want to say Soviet Communism wasn’t Communism. If the system known as “capitalism” has operated in a certain way for its entire history, and if the people owning capital have operated in certain ways for as long as they’ve been the big movers in society, then the fact that they still operate in those ways now still makes them “capitalists” even if there is a fairy tale version of capitalism told of by ideologues that hypothetically would work in some other way if only enough pixie dust were sprinkled.
    
    It’s “even more so” because capitalism is a descriptive term; it was invented to describe an actual, existing system. Therefore, if you have the actual existing system happening that it was invented to describe, that system is capitalism and its bosses, who own capital and extract surpluses, are capitalists. Full stop, the end. Those talking about what Communism should be at least have the defence that Communism is a prescriptive term invented to define an idea of something that could happen in the future, and which pre-dated any actual governments that called themselves “Communist”. It’s still kind of silly, but it’s not full out contradictory.
  - Uncle Bob 1 on March 01, 2016 · at 9:36 pm EST/EDT
    
    Marxism,though having a lot of Jewish followers in those days (as did capitalism then and now). Was not a “Jewish” plot against Russia and China. China wasn’t even seriously thought about much in the West then. It looked in those days as a declining society slated to be divided up among foreign powers. And Russia, if you read Marxism was considered as not able to become a Marxist state (for a century at least). That was one of the big disputes among Marxists at the time of the Russian Revolution. Most of them (outside Russia,and some inside) didn’t approve of the revolution at first. They thought only advanced capitalist societies with huge factory working class populations could become Marxist states. And Russia didn’t fit those criteria.It was only with the 1930’s industrialization that the USSR gained a vast factory working class.Which was one of the main reasons that the Bolsheviks pushed so hard for revolutions in Western and Central Europe.They knew by their own ideology, their revolution wasn’t “supposed” to happen. Russia was “supposed” in Marxist thought to go through a long “capitalist” period. Until a huge Russian factory working class was created. And “then” Marxism would come to Russia. The Bolsheviks hopped that with a “Europe-wide” revolution they could bypass the required capitalist stage, and the other countries would help Russia to build a working class faster.When that failed is when they began trying out Stalin’s “Socialism in one country” program.
    - Siotu on March 02, 2016 · at 8:18 am EST/EDT
      
      Which all goes to demonstrate why Marxism was a fraud right from inception. It was counterfactual nonsense; wrong on so many issues, completely useless in terms of explaining history, economics or attempting to make rational social and economic prediction. Not really surprising when you consider what sort of hideous creature Karl Marx actually was. Nevertheless, his ideology was the perfect foundation for the empowerment of criminals like Lenin and later Stalin.
      
      Siotu
      - Anonymous on March 02, 2016 · at 1:29 pm EST/EDT
        
        Truest statement I have read on this blog. Bravo !
      - Ewan on March 02, 2016 · at 3:59 pm EST/EDT
        
        Siotu
        Whatever Marxism was, it was not a fraud. It was an example of Classical political economy. It was of its time, like the political economy of Ricardo and Mill, and used the methods of its time. It did not provide the ideological basis for the dictatorship of the Party in Russia or China, neither of which exhibited the conditions Marx thought necessary for a proletarian revolution. Marx the man was apparently (and ironically) exploitative of those around him. This has little to do with the quality of his theoretical work. His political economy has the advantage over modern economics of exposing the ideological assumptions supporting the exploitation of the many by the few, i.e. the “class struggle”. In this, he is more honest than the modern science of economics.
        
        Hayek on March 02, 2016 · at 6:40 pm EST/EDT
        
        I believe this illustrates the point your making
        https://m.youtube.com/watch?v=-8bqQ-C1PSE
        
        Ewan on March 02, 2016 · at 10:07 pm EST/EDT
        
        Hayek
        It illustrates one of the points – that a peasant economy is not what Marx had in mind. The Russian Revolution and the Chinese Revolution are irrelevant to the question why Marx got it wrong. It’s a good question. How did capitalism survive the Depression, and how did it succeed in atomising the working class? Is it because Marxist economics is wrong and neo-classical, or new classical, or new Keynesian or… is right?
        
        By the way, thanks for the clip. A nostalgia-fest for those of us who can remember when there were trade unionists, and trots, and they talked like that (and meant it).
        
        Hayek on March 03, 2016 · at 12:09 pm EST/EDT
        
        Your welcome Ewan, whatever we think or feel we still need to retain our sense of humour .
  - RR on March 03, 2016 · at 7:28 am EST/EDT
    
    Thanks to Wall Mart-they are all dead.
    RR
  - Anonymous on March 03, 2016 · at 2:19 pm EST/EDT
    
    The idea that social, economic cultural,, and epistemologic processes can be explained by race is primitive and wrong. It results in ideologies such as Nazism.
- Anonymous on March 01, 2016 · at 7:17 pm EST/EDT
  
  A capitalist state is a state controlled by its capitalists. First achieved in The Netherlands in the late 16th century.
- Uncle Bob 1 on March 01, 2016 · at 8:34 pm EST/EDT
  
  That used to be true. But that has changed. I’m sure you’ve probably heard the term “State Capitalism” before.Few if any countries economies can be considered as “pure” anymore.
  - Martin from S.E.B. on March 01, 2016 · at 11:58 pm EST/EDT
    
    Hi UB,
    
    is is State-Capitalism or not rather “Capitalism-(non)States” ?
- Anonymous on March 01, 2016 · at 11:05 pm EST/EDT
  
  So true- Goverment by its very nature is Socialist / Marxist. They produce nothing but debt. History is there for anybody to study and see this to be true . Capitalism produces wealth- Goverment destroys wealth ( produces debt). The writer also does not understand money- What is money ? Anything we want it to be that we agree has mutual value to either side of a transaction. If producing fiat money by the boatload produces hyperinflation why haven’t we seen this around the world as central banks print money endlessly. Of course we have Venezuela and Zimbabwe , not exactly poster children for capitalism. Who is responsible for those countries economic devastation ???
  - Anonymous on March 02, 2016 · at 1:35 am EST/EDT
    
    “If producing fiat money by the boatload produces hyperinflation why haven’t we seen this around the world as central banks print money endlessly.”
    
    Please analyze asset price increases since 2010, E.G. London Property, Chinese Property, Australian Property….
    - Anonymous on March 02, 2016 · at 12:29 pm EST/EDT
      
      Hardly proof of hyperinflation . You forgot to add in the Art Market, high end collecter cars etc. This is not hyperinflation , this is the super rich ( especially Chinese ) trying to find places to hide their money from Goverment . Did your house hyperinflate . ? No. The rest of the world is suffering from deflation. We are just trying to hide our money from Goverment. If we all could afford hiding places in Hawaii we would.
  - Anonymous on March 02, 2016 · at 6:38 am EST/EDT
    
    If that were true, why do capitalists horde the money that government creates? Government ‘debts’ are government currency units swapped for interest bearing, no risk assets.
    
    The government ‘debt’ exactly equals the net financial assets of the non-government sector. And only the government can create net financial assets.
    
    You’re upside down.
    - Anonymous on March 02, 2016 · at 12:33 pm EST/EDT
      
      So when a bank takes in your 1 euro and then loans out 10 against it they haven’t created a financial asset ? Goverment creates nothing but DEBT !
      - John G on March 02, 2016 · at 5:36 pm EST/EDT
        
        Firstly, the bank doesn’t make loans ‘against’ or from deposits. It creates a deposit out of thin air by making the loan.
        
        But there is not net financial assets created i.e. there is an equal credit and debt created + nets to zero.
        
        When the government spends it creates deposits in the private sector by marking up numbers in private sector bank accounts with no corresponding private sector debt i.e. it creates net financial assets.
        
        Anonymous on March 02, 2016 · at 6:46 pm EST/EDT
        
        So what is the point of “Stress Tests” ?
- Anonymous on March 03, 2016 · at 6:38 am EST/EDT
  
  Right on.
- RR on March 03, 2016 · at 7:10 am EST/EDT
  
  Classic case of solipsism which has nothing to do with reality.
  RR
argos on March 01, 2016 · at 3:17 pm EST/EDT

The only way out of this mess: Obliterate all lives !

My 2cts advice for the neo-cons : Pluto has some atmosphere.
Tom Welsh on March 01, 2016 · at 3:25 pm EST/EDT

“The US government gained a lot of credibility after WW2 by outlawing offensive war…”

Very funny.
- Cathal on March 01, 2016 · at 4:45 pm EST/EDT
  
  Hi Tom,
  It is funny isn’t it. Those days were naive and optimistic.
  Or was it just PR?
  Best,
  Cathal
  - Flonerd on March 01, 2016 · at 6:19 pm EST/EDT
    
    Yeh, the Korean War was all about naive optimism ;)
    
    ““Over a period of three years or so we killed off – what – twenty percent of the population.”
    
    http://www.globalresearch.ca/know-the-facts-north-korea-lost-close-to-30-of-its-population-as-a-result-of-us-bombings-in-the-1950s/22131
    
    The US was always an Imperial Power…just ask the Mexicans about that original false flag incident :D
    
    http://www.globalresearch.ca/how-to-start-a-war-the-american-use-of-war-pretext-incidents/28554
    - juliania on March 02, 2016 · at 1:33 am EST/EDT
      
      Something called the United Nations was invented. Something called International law became promulgated by and adhered to by countries that wanted war to end so that the interactions between countries could be peaceful. Seems idealistic, but it wasn’t just economics that ruled the world in those days. A lot of people looked to their civic responsibilities – gosh, some still do!
      - Siotu on March 02, 2016 · at 4:10 am EST/EDT
        
        Juliania
        
        The study of economics is the study of human action. Every political decision, every political ideology when applied has economic consequences. Whether one chooses to analyse and understand economics prior to acting or refuses to so do and acts in ignorance, the economic consequences will occur. There is no escaping economics in this world!
        
        Siotu
      - Flonerd on March 02, 2016 · at 10:50 am EST/EDT
        
        You just ignored 60 years of world history with that statement. The AZE has always controlled the global institutions setup after WWII, including the World Bank and the IMF.
        
        Israel is the best example — its crimes have been ignored since 1948 and the UN rubber-stamped the ethnic cleansing of the Palestinian people.
        
        Enough hopium, please.
        
        Flopot on March 02, 2016 · at 11:43 am EST/EDT
        
        Oops. My last comment was @Juliania not Siotu :P
        
        @Siotu
        
        Neoliberalism is the pseudo-intellectual baggage used to justify Oligarchic rule; just like Communism was another intellectual wheeze to hand over wealth to the few.
        
        That so many vociferously defend such sophistry proves that propaganda trumps outcome every time.
Vend from Canada on March 01, 2016 · at 4:27 pm EST/EDT

Beautiful analysis. May I add that in times of inequality we have lot of poverty, and poverty leads to population increase. That is a natural thing; we are nothing but boxes for genes, to make it worse, intelligent ones. And what is it that genes do – try to multiply, and pass its blueprint to the future generations.

In good times, being intelligent species, we figure out that our chances of passing genes are higher if we focus energy and resources to smaller number of offspring. In tough times, it is not certain that focusing energy and resources to a smaller number of offspring. The natural response is – procreate as much as possible, with hope that some will survive. It is evident that somehow number of births is higher than number of deaths, hence, overpopulation, especially in poor countries. How come? The general progress makes even lives of poor a bit more bearable than in the past. For example, a poor peasant from India in 2015 has better chances of survival and escape from absolute poverty to than a poor city dweller of Charles Dickens time England. Hence, the slow, or not so slow, increase in population. This leads to over-pressure on available resources, and the vicious circle goes on and on. More poor people = more potential slaves, who are not called slaves, they believe they are free, and are happy to work for low wages, and, as the article says, are willing to give up their comforts in order to enable the offspring with better chance in the future.

I have heard many times (I live in Canada) people saying “poor countries have to stay poor, if they don’t, their standard of live would rise and they would be consuming more of everything, and given their numbers, we would be all doomed”. Simply not true, but useful in preserving status quo. My both grandfathers had 7 siblings each. The all survived. Each of 14 siblings had no more than 2 kids – my parents had 1 sibling each. In one generation average number of siblings per family dropped from 14 to almost 2! generation of my parents had mostly 2 kids, with only one here and there, less than ‘almost 2 ‘ per family per family. My generation has equal number of families with 2 and with one kid, some have no kids at all, resulting in average 1.3 kids per family. It has nothing to do with ‘cultural’ factors. Where I come from, it was considered a cultural thing that Muslim families have 4-5 kids, in my generation. Christians had 1-2. All my grandparents were christian, yet they had 7 siblings each, at the time (end of 19th and beginning 20th century) when life was much more difficult than one or two generations later. We lived in a socialist country and economic inequalities were reduced very quickly. In my generation (born 19060-65), both Muslims and Christians have the same number of kids per family – more than one, less than 2. It was also a common assumption, right or wrong, that Albanians living in the country were mostly “primitive., living in feudal overly religious extended families” and because of that they had many children, even in my generation. However, some of them escaped from extended families, went to work in Germany and Switzerland, (wives stayed home with children) and were able to afford individual houses and standard of living similar if not higher than surrounding Slavic population. At the beginning the drill was this: work yourself almost to death on bauchtell (construction site) in Germany, once a year come home, make another baby and so for several years. Very soon the situation changed – the ladies refused to be just a child bearing machines, and number of kids for urbanized Albanians dropped to – more than one, less than 2 per family!

This is just my observation, but the numbers of kids per family are strikingly close to official statistics. Which leads to conclusion – poverty leads to many children, good life leads to much less. Since the ratio (at least in my family) was 8:2 = 4 in 3 generations, from rural pre industrial to urban post industrial, if we allowed most of the poor countries to mind their own business and develop in peace, from current 8 billion people Earth’s population would drop to 8:4 = 2 billion people, in 1 or two generations. The ecology would recover and the life would be rather bearable affair. No need for HIV, Ebola and Zika to control the population, since the birth rate will go up no matter what, it is natural response of living organisms to worsening conditions for survival. If we stay on current course, soon we will regret that humans (Euro-Asiatic at least, mostly Euro, of western type) discovered agriculture and whatever followed from that.

let’s hope the capitalism destroys itself before it destroys the Earth. maybe I should have posted this on Club Orlov….

Cheers, Vend from Canada
shh on March 01, 2016 · at 5:15 pm EST/EDT

Usually I like the commentary here and I’m sure there was something valuable in this post but I couldn’t get past the line “Capitalism was governed by the gold standard system which was international, very solid, with clear rules and had brought great prosperity”

This is utter fantasy and any true critic of Capitalism should really know better. Anyone remember Marx and Engel’s and the eloquent dissections of Capitalism that occurred ling before the industrial revolution was complete?

I’m sorry but with such a fundamental gloss over the primary point, I just couldn’t be bothered to read the whole thing.
- Diaspora_M on March 01, 2016 · at 6:10 pm EST/EDT
  
  Say what you will, Gold was inherently more fair then the current systems which depreciate the value of the holder of a currency while it is in his very hands.
  
  Every injection of “liquidity” in the system sabotages people who save money which unbalances the economy leading to bubbles.
  
  Put another way, if the value of labor is a relative constant but the value of the money they are paid is rapidly expanding beyond equilibrium with the value of labor, the end result is the persons who received the initial infusion of cash got to spend it while the ratio of labor to value was better then the poor bastard working further from the influx because by the time he got his paycheck that money was redistributed throughout the economy reducing the purchasing power of his paycheck.
  
  In effect a non-paper standard based on a finite resource prevented this grievous theft of value. That no one can paper over with theories or magical thinking. You wan’t to flood the market with gold? Fine! Go mine it!
  - MV Jim on March 02, 2016 · at 12:10 am EST/EDT
    
    Thanks, Very well said !
- Purple Library Guy on March 01, 2016 · at 6:43 pm EST/EDT
  
  I too am distinctly iffy about the gold standard thing. As if there were never any depressions before the 1929 one! Capitalism was always crisis prone, and seemed to manage quite a few bubbles and unsustained frenzies on the gold standard too.
  I also question this: “Capitalism requires World War because Capitalism requires profit and cannot afford the unemployed” (my emphasis). Say what? Capitalism loves the unemployed. It needs the unemployed. They are the “reserve army of labour” whose desperation keeps wages down. One of the things that capital deliberately did in the 80s was bring unemployment up again so as to bring wages down; they invented theories of how the sky would fall if we didn’t increase unemployment (google NAIRU). Of course there’s a limit to everything–capitalism can’t really function on 100% unemployment, obviously, just as feudalism can’t really function with zero farmers. Gotta be some wage labour producing and getting exploited for surplus, but capital certainly doesn’t want full employment, and it seems like the level of unemployment the capitalists are happy with has been going up. True, that’s probably a sign of crisis.
  
  I’m also not that satisfied with the line about Weimar Germany trying to inflate away its debts. Weimar Germany’s war “reparation” debts were not denominated in (paper) marks; they had to be paid in gold or foreign currency. It was largely the attempt to buy foreign currency to pay the debts with that dumped the mark; the German government was effectively attacking its own currency by selling masses of marks, and every time the value went down, they would need to print even more marks to buy the next batch of foreign currency . . . a vicious spiral. But what is often forgotten is that while the hyperinflation hurt and was dramatic and all, it wasn’t actually as damaging to most people as the deflation a few years later, when they had a depression like everyone else.
  
  But overall, there’s a lot of good stuff in the article. I don’t think any of my disagreements have a huge impact on the general thrust of what he’s saying.
  - Diaspora_M on March 01, 2016 · at 8:22 pm EST/EDT
    
    I would point to the Yugoslav hyperinflation and humbly disagree.
    
    When a pack of gum goes from 50 dinars to a thousand in a week and your paycheck doesn’t keep up causing you to run to more stable currencies to save value (you know the thing that makes transactions possible) I would argue a gold backed Dinar wouldn’t have become a barrel full of toilet paper.
    
    I bought ice cream for 1 billion dinars towards the end. I was lucky, my family made money in dollars. The rest between inflation and price controls (communists loved price controls) Hahhhahah *sigh* people were screwed. Price controls mean’t no product went to market and those that did got toilet paper in return.
    - Purple Library Guy on March 01, 2016 · at 8:41 pm EST/EDT
      
      Disagree with what? I’m willing to believe that some hyperinflations have been worse than some examples of deflation. I defer to you about the seriousness of the Yugoslav hyperinflation. However, the German hyperinflation was not as bad as the German austerity/deflation/depression a few years later. For people on average, particularly debtors and people without much savings, and for economic output.
    - Vend from Canada on March 01, 2016 · at 9:35 pm EST/EDT
      
      Compatriot, never ever use money instead of toilet paper :-) It will give you a horrible infection.
      
      Rather, as my family did, burn it in the furnace and generate some heat. My family was paid in dinars, yet we had to burn them because by the evening it would have become a worthless paper, if not converted to 2-3 DM.
      
      Actually, when I look back at 1992,93 -that was the only time in life I could afford to burn billions of currency units. Wasn’t as bad though as in Germany 1918, people say they used garden carts to haul money around.
      
      Luda kuca = loony bin everywhere
      
      Vend from Canada
  - Anonymous on March 02, 2016 · at 12:33 am EST/EDT
    
    Hi,
    A senior German capitalist wrote me concerning the above article, you may appreciate it:
    
    Havenstein had not much choice. Germany had to pay reparations, but Germany lacked raw materials from the beginning, plus iron ore areas were cut off to France and Poland. Then it first suffered blockade and starving (1919), later a lack of money to buy (all gold was gone) and finally no export market, as trade restrictions went on. Finally, the French occupied the Ruhrgebiet – so no coal either. 2 Billion (gold) reparations per year would have been possible only with a kind of Export-Wirtschaftswunder, destroying competition in hostile countries. So payment was impossible and Germany in breach from the beginning, Reichsmark-inflation ordained. The Versailles reparations “Diktat” was not supposed to be fulfilled – it was the continuation of war by other means. The Reichsmark was already finished in 1919 – still it took 4 years for it to disappear; in those four years incredible fortunes were made selling it forward against dollar, pound and francs, down into that hyperinflation-hole. This was the biggest “sure-trade” ever. The winners were anybody owing Reichsmark or in a position to short it (banks and trading houses and the German state itself, while Germans trusting their state lost 100% of their money. The war debt had already “halved” the value of the Reichsmark in a real sense; Versailles was no peace treaty – it was the second half of the war.
    
    This is crucial: The amount of reparations were not only too high; they were impossible to pay. And THEY knew it! It was intentional.)
    - Purple Library Guy on March 02, 2016 · at 8:38 am EST/EDT
      
      How very modern. Versailles treaties: Not just for Germany any more.
  - Siotu on March 02, 2016 · at 12:46 am EST/EDT
    
    Purple Library Guy
    
    You are missing a great deal of salient fact from your analysis. That undermines your conclusions. Some examples.
    
    While it is true there was a gold standard operating (and that was good), governments allowed banks to operate on a fractional reserve basis. This behaviour leads to credit expansion which is the causal element of the cycle of booms (bubbles) and busts. Note that in no other sphere of business is it legal to operate on a fractional reserve basis. Were one to so do those same governments would aggressively pursue her with criminal prosecutions for fraud, trading while insolvent or worse. Criminal sanction would be taken (except, of course, were it a duly accredited bank she was operating). Capitalism does not allow banks to be exempted from the consequences of commission of fraud (which is what fractional reserve banking is). It does not elevate fiat money to monopoly status by way of government protection.
    
    As far as unemployed people are concerned, there are several causal elements. Firstly, minimum wage laws. Secondly, welfare laws. Thirdly, registration and other regulatory demands. None of these are caused by Capitalism.
    
    Final point. The labour theory of value, disproved long before the time Marx adopted it, does not conform to reality. It is little more than childish foolishness.
    
    If it is Capitalism you want to discuss, start by gaining at least a basic understanding of what it is. You will not find that in Marx’s turgid writings.
    
    Siotu
    - Purple Library Guy on March 02, 2016 · at 9:11 am EST/EDT
      
      On the unemployment question, minimum wage laws and welfare do not cause unemployment. I know that neoclassical theorists swear up and down that their theories, being perfect Platonic conceptualizations, take priority over messy things like reality, and therefore since minimum wages and welfare ought to cause unemployment, they must actually do so.
      But empirical studies of the real world have been stubbornly unco-operative. Minimum wages, and changes in the minimum wage, have generally been found to have no real effect on unemployment one way or another.
      On the matter of gold standards and fractional reserve banking–this seems like a “No True Scotsman” argument except worse because there have never been any true Scotsmen. Has there ever been a situation in which there was capitalism, and a gold standard, but no fractional reserve banking? I’m thinking no. Frankly, banking with anything resembling paper money or even notes saying “Give this guy 100 gold sovereigns and charge it to Jacopo di Florence and sons” in effect becomes fractional reserve–somebody‘s going to come up with the idea that not everyone’s gonna insist on having their actual gold all at once so you can get away with lending more than you actually have. In an informal way I have no doubt there’s been fractional reserve banking since the Renaissance.
      Then how the hell can anyone confidently say how wonderful a gold standard would be, without nasty old fractional reserve banking undermining it? Let alone claim that capitalism just isn’t “real” capitalism as long as it’s hobbled by fractional reserve banking–something that has been intertwined with it since it was born? I don’t even see why that would be so great. A gold standard with no fractional reserve banking would be nothing more than a really, really, really tight money policy. Ask the Greeks how amazingly wonderful those can be.
      
      Finally, the labour theory of value’s validity is a matter of just who you consider the “true” owner of surplus value. As such, calling it valid or invalid is mainly a political or philosophical statement rather than an economic one. The question is, whose side are you on? If you start from the oligarchy’s side, it’s invalid. If you start from the majority’s side, it’s valid.
      
      As a side note, riddle me this: Who made the following statement?
      “Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.”
      No peeking now.
      …
      …
      …
      Yes, you guessed it: Abraham Lincoln.
    - Ewan on March 02, 2016 · at 4:17 pm EST/EDT
      
      Siotu
      Fiat money (backed by a central bank) and fractional banking are two ways to make a market economy more efficient. Neither is perfect. No-one has yet formulated the perfect system of banking regulation. And monetary economists are forever concocting commodity index standards, bimetallic standards etc. which they assert will prove more robust than fiat money; and free banking systems to replace the central bank. There may be an ideally perfect monetary regime that frees economic agents from all nominal illusions and allows the real economy to function at its highest potential efficiency. But in the meantime, fiat money and fractional banking can be made to work. Reform offers a more practical chance of progress than root and branch revolution.
    - Paul Cockshott on March 02, 2016 · at 10:31 pm EST/EDT
      
      Siotu, when you say that the labour theory of value is outdated and false, I think you are probably not up to date with the last 20 years of empirical economic research into the matter. I link here to a paper originally published in the Cambridge Journal of Economics, but there are lots of other similare papers. They show that for all countries studied the industrial price structure corresponds with circa 95% correlation to that predicted by Marx and Ricardo’s theory.
      
      https://www.researchgate.net/publication/5208118_Labour_Time_versus_Alternative_Value_Bases_A_Research_Note
      - Purple Library Guy on March 03, 2016 · at 6:24 pm EST/EDT
        
        Interesting.
- Anonymous on March 02, 2016 · at 5:45 am EST/EDT
  
  Indeed, the gold standard was a constant crisis. It’s a pointless brake on government fiscal policy achieving public purpose.
  
  It suits the private bankers and the owners of gold mines. No one else.
  - Siotu on March 02, 2016 · at 8:12 am EST/EDT
    
    Of course, because it is so much worse for banksters (including central banksters), spendthift governments and all their crony mates when they are freely able to create money out of thin air! Of course the gold standard was better for them since it places limits on the expansion of credit and unbacked fiat money…oh… wait on there….oh dear.
    
    Have you even considered what you have written? It’s illogical nonsense.
    
    Perhaps you were being ironic……(?)
    
    Siotu
    - John G on March 02, 2016 · at 5:04 pm EST/EDT
      
      No, I wasn’t being ‘ironic’. The gold standard is an artificial constraint on government spending.
      
      If you believe that pro-cyclical fiscal policy that causes high rates of unemployment and increasingly deep recessions and depressions, be my guest.
      
      But do leave the insults out, please.
      
      When private sector spending (and thus income) declines, government deficit spending is needed to maintain aggregate demand. The gold standard defeats public purpose.
      - John G on March 02, 2016 · at 5:44 pm EST/EDT
        
        That should read “if you don’t believe that pro-cyclical ….”
        
        Anonymous on March 05, 2016 · at 5:14 pm EST/EDT
        
        Hello John G
        
        I was serious. What you were and are promoting is illogical nonsense.
        
        A gold standard effects the protection the average person against some of the depredations, frauds and thefts undertaken by government, its cronies and banksters. Governments are an economic parasite on the people. They exist on the expropriation of wealth, which they consume. The expropriation can be accomplished by direct theft from people or by debasing their means of exchange. Specie backed currency places a limitation on the latter tactic, for it prevents the government and the banksters from engaging in currency inflation. Currency inflation destroys savings and damages people living on fixed incomes. For example, retirees and wage earners.
        
        Since you are clearly aligning yourself with Keynes, here is an interesting comment from him.
        
        “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
        Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
        
        It is better to avoid the destruction by placing hard constraint upon those who destroy. Savers and wage earners are protected by elimination of the means of their destruction. That means dis-empowering the government and its central banker cronies. A requirement for specie backed currency works to achieve that by acting against currency inflation.
        
        Final point. The economic boom-bust cycle is caused by the cyclical financial policy you do appear to support. It exists as the direct result of the interferences into people’s daily affairs and transactions by the very institutions that claim their existence prevents it.
        
        Siotu
        
        John G on March 06, 2016 · at 2:32 am EST/EDT
        
        Sorry, but I can’t be bothered with Austrian School cant.
        
        It’s all irrational nonsense and it doesn’t deal with the real causes of inflation because it completely misconceives the operational reality of the monetary and banking system.
        
        Keynes recanted all that Walrasian drivel later as his knowledge and experience grew.
        
        Keynes also said:
        
        When we have unemployed men and unemployed plant and more savings than we are using at home, it is utterly imbecile to say that we cannot afford these things. For it is with the unemployed men and the unemployed plant, and with nothing else, that these things are done.
        
        To have labour and cement and steel and machinery and transport lying by, and to say that you cannot afford to embark on harbour works or whatever it may be is the delirium of mental confusion.
        
        Moreover, he said that:
        
        … the Chancellor of the Exchequer must remove and reverse his pressure against public spending on capital account.
        
        Every public department and every local authority should be encouraged and helped to go forward with all good projects for capital expansion which they have ready or can prepare – roads, bridges, ports, buildings, slum clearances, electrification, telephones, etc., etc.
        
        i.e. massive fiscal stimulus to create full employment.
        
        Hayek on March 06, 2016 · at 10:40 pm EST/EDT
        
        And as Milton Friedman said, if you believe paying men to dig a hole helps the economy, why use a shovel when you can use a spoon ( I am butchering his quote but you get the drift ). Also, going off topic a little- why make the minimum wage $15 when you get make it $ 50 or more and cut to the chase so that everyone can be affluent so to speak.
        If you want full employment ala Keynes you can just use the communist economic model, Prosperity and increasing standards of living require something different
        
        John G on March 07, 2016 · at 6:05 am EST/EDT
        
        Because there are real resource constraints.
        
        Hayek on March 07, 2016 · at 2:03 pm EST/EDT
        
        What restraints? Labour , Material . Certainly not money,
        
        Anonymous on March 07, 2016 · at 4:44 am EST/EDT
        
        John G
        
        You say you can’t be bothered and then respond at length. Consistent indeed.
        
        You may have noticed that in his magnum opus Keynes summed up your position when he opined, “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”
        
        Now THAT is an impressive piece of monetary crankism. Think about it for just one moment. What he was saying is that the path to wealth is to dig holes, put fiat notes in the holes, fill in the holes and then dig them up again. He was promoting make-work funded by inflating the currency. Sure, he thought building houses would be better than digging out holes and filling them back in again (he would have enjoyed viewing all those never to be inhabited empty houses built in the USA and China over recent years), but again he was promoting make-work funded by debauching the currency. He was not concerned whether the effort of the workers engaged in his activity was productive or not, whether it was sustainable or not, whether it was the best use of people’s intellectual and physical efforts or not, whether it was the best use of available resources or not, whether it resulted in the creation of goods and services that people wanted or not and whether it satisfied their demands and requirements or not. None of that mattered to him. He was out to increase the amount of currency. Hence he could pretend the scheme could increase the “real income of the community, and its capital wealth”. In the early stages it would appear his scheme was working to plan since members of the community would eventually receive a larger number of currency units in transactions than previously was the case. But there is nothing for nothing in this life and no free lunches besides. The amount of currency would increase alright but the purchasing power of the currency would be sharply reduced. Whenever currency inflation has been tried the practical result has been loss of purchasing power, a boom-bust cycle of increasing severity, destruction of wealth and a general loss of living standard (especially for savers and those on fixed incomes, particularly on the lower end of the income scale).
        
        Make no mistake, what Keynes was promoting was inflation of the currency and hence its debauchery. Keynes was serious even though he knew it could not work (see the Keynes quote previously provided). When pressed he never dared address his inconsistencies, nor did he care to consider the problems his ideas would cause to be realised in the future. Never mind, he thought, in the end we are all dead anyway. Well, he sure is dead, but we are living with the consequences of his tomfoolery. Damnable monetary crank. Worse, he knew better. He knew exactly.
        
        Re the cause of inflation
        Inflation of the money supply is caused by a partnership of banks and government. They call new currency and credit into existence. That debases the existing pool of currency. That is, its spending power is reduced. This is crippling for wage earners and others living on a fixed income. It destroys savings. It reduces people into dependency.
        
        Has it prevented the boom-bust cycles? No. It has failed utterly. They have grown in magnitude and severity.
        
        Re “massive fiscal stimulus to create full employment.”
        It won’t create full employment. It can’t achieve that. What it will cause is a bubble and then, inevitably, a collapse. Happens every time.
        
        Siotu
        
        Anonymous on March 07, 2016 · at 6:14 am EST/EDT
        
        ” What he was saying is that the path to wealth is to dig holes, put fiat notes in the holes, fill in the holes and then dig them up again.”
        
        Clearly he wasn’t.
        
        And you don’t understand inflation at all. Inflation occurs when there is more money being spent than the economy’s capacity to supply the demand.
        
        Clearly with elevated unemployment levels in the neoliberal era that isn’t the case.
        
        Of course governments can achieve full employment. It used to be standard policy in the post war Keynesian era.
        
        Then the idiot monetarists gained the upper hand with their crazy theories that persist to this day. Despite being debunked decades ago.
        
        Now, we have governments deliberately causing unemployment as a matter of policy to supposedly (and incorrectly) tame inflation.
        
        John G on March 07, 2016 · at 6:53 am EST/EDT
        
        All your Austrian/neoclassical/mainstream views on inflation assume that there is constant full employment, constant full capacity utilisation of capital infrastructure and a ‘value that can be ascribed to currency units. And a quantity of money that constantly moves around.
        
        None of which are true.
        
        It’s not stock/flow consistent thinking. It’s not even economics. It’s fantasy.
        
        Siotu on March 07, 2016 · at 6:03 pm EST/EDT
        
        Anonymous
        
        About Keynes.
        You are wrong. Read what he wrote. After describing his hole digging and filling in and digging out again process he opines, “the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.” He is quite clear. I’ve done you the service of providing the quote so you do not even have to search it out. Go read it.
        
        Re inflation
        Quoting, “Inflation occurs when there is more money being spent than the economy’s capacity to supply the demand.”
        You are wrong. Inflation is the inflation of the money supply. That is, it is caused governments and banks increase the amount of currency.
        
        Re employment
        Quoting, “Of course governments can achieve full employment. It used to be standard policy in the post war Keynesian era.”
        And it did not work.
        
        Siotu
        
        PS Why not post under a name? Pick something you like. It could be Bill or Brave or Wanderer or anything. Just use a name . It makes it easier and more pleasant to correspond.
        
        Siotu on March 07, 2016 · at 6:22 pm EST/EDT
        
        John G
        
        I made no assumption about “full employment” (whatever you happen to define that to actually be). I made no assumption about “capital utilisation” either.
        
        I have pointed out to you that inflation of the currency by government and banks harms people, in particular savers and those on fixed incomes. Keynes and Lenin admitted that inflation of the currency is economically and socially extremely destructive. There is no way to avoid that conclusion. It has proven devastatingly accurate.
        
        Your position is not valid and you are not able to defend it. It is with humble respect that it is fully recommend you read what Lenin and Lord Keynes actually wrote. Read von Mises also, since you so grossly mischaracterised his economics. Get it right I say!
        
        Siotu
        
        John G on March 08, 2016 · at 5:42 am EST/EDT
        
        “You are wrong. Inflation is the inflation of the money supply.”
        
        No it isn’t.
        
        “And it did not work.”
        
        Yes it did, even under the fixed exchange rates in the Bretton Woods agreement.
        
        “I made no assumption about “full employment” (whatever you happen to define that to actually be). I made no assumption about “capital utilisation” either.”
        
        For your theory to work, these assumptions must be made.
        
        That’s why youir theory is bunk.
Anonymous on March 01, 2016 · at 6:03 pm EST/EDT

“The Chinese have many motives but their first motivation is power. Power is more important than money.”

China seeks to develop comprehensive national strength, but in the context of a multipolar world.

If anything, it is the West–from Europe to the Anglophone entities–that are driven by the desire for power in an unparalleled manner.

Indeed, a will to power is what historically defines Euro-American nations, far beyond what you see outside of the West.

After all, the Europeans are guilty of the greatest land theft and conquest in human history with their invasion … sorry… “discovery” of the New World, where they implanted White settler states throughout the Western Hemisphere. This is not to mention the Europeans’ ambitions to colonize the Eastern Hemisphere for the past several centuries from Africa to the Middle East to Asia.

Today, slogans like “US Full Spectrum Dominance,” the “New World Order,” “globalization,” or “Promoting Freedom, Democracy, and Human Rights” are the many masks of this Euro-American ambition.
- John Rambo on March 01, 2016 · at 10:16 pm EST/EDT
  
  I’m gonna tell you right now man, if you think US imperialism is bad, Chinese imperialism is going to be a lot worse. And like Chatal I too had the disprivilege of employment in the PRC and I’m sure can he attest there is no “mutli-polar world” when it comes to making profits, and the Chinese sure love their profits.
  
  All the PRC is a massive factory for the elites to make a fortune then run off to Europe or the US to enjoy long vacations. And Europe and the US loves elitist Chinese money.
  
  The white-man may have refiend capitalism, but the Hans Chinese perfected it.
  - Anonymous on March 02, 2016 · at 6:21 am EST/EDT
    
    No comment ;)
Peter AU on March 01, 2016 · at 6:46 pm EST/EDT

“I’ve spent my adult life in 51 countries. This was financed by correctly anticipating the Great Financial Crisis in 2008.”

Old and wise in 7-8 years huh?
- Anonymous on March 02, 2016 · at 3:59 am EST/EDT
  
  Peter AU
  
  Yes indeed. Well spotted.
  
  I don’t buy it.
  
  Siotu
  
  PS Assume a life spent wandering from place to place, staying a mere six months in each country visited before moving onward to the next. To visit 51 countries in that manner would require some 25 years and six months.
  
  To visit all 51 countries in only 8 years requires rushing about! There is only enough time for an average stay in each country of some 7 1/2 weeks (less if you deduct time spent moving and setting up in each place and then, all too soon, packing it all in again so as to move on). Not much time at all really. Not enough quality time to learn much of anything. What exactly will be gained from the process of perpetual tourism one wonders? Certainly there is not the opportunity to build family, invest in community, put down roots, create a business, make real and substantive friendships, commit to a place and build life there. And what World view is produced by such aimless wanderings, belonging nowhere exactly, having no roots or serious commitments in any particular place, for year after year after year?
- John G on March 03, 2016 · at 6:22 am EST/EDT
  
  I don’t buy any of this guy’s story at all. None of it rings true.
Martin from S.E.B. on March 01, 2016 · at 8:02 pm EST/EDT

Ukraine’s post-Maidan governing coalition the former leader of the Orange Revolution ‘Gas Princess’ Yulia Tymoshenko has now called for early elections. What’s more she’s doing so against the wishes of the Americans:

http://russia-insider.com/en/politics/ukraines-tymoshenko-makes-her-play-calls-new-elections-americans-be-damned/ri13126
Martin from S.E.B. on March 01, 2016 · at 8:06 pm EST/EDT

Yes, I love China, too.
However – as I said some days ago, they are too much into Oligarchy and Mao would turn in his grave.

And only 3 days later, this:

China’s Mass Unemployment Wave Begins: Six Million Workers To Get Pink Slips
http://www.zerohedge.com/news/2016-03-01/chinas-mass-unemployment-wave-begins-six-million-workers-get-pink-slips

It is sad, that China has produced too many greedy capitalists, including of course party members :(
Rutger Börjesson on March 01, 2016 · at 8:20 pm EST/EDT

You are not describing capialism. You are describing a system where the capitalism is overrun by state regulated finacial powers.
- Martin from Soviet East-Berlin on March 01, 2016 · at 10:27 pm EST/EDT
  
  @Rutger Börjesson on March 01, 2016 · at 8:20 pm UTC
  
  > You are not describing capialism.
  > You are describing a system where the capitalism is overrun by state regulated finacial powers.
  
  Nope! That’s only what they tell you on the very surface.
  The truth of the matter is that there is no state anymore and that there are no souvereign countries anymore.
  Because souvereignity begins with Money. And money has been lent to the states starting centuries ago at interest’s interest. By *PRIVATE* banking dynasties.
  
  Every time the states went exponetially into bankruptsy (as expected and there is _no_ mathematical way to avoid that), they took over all the assets for worthless paper. That’s how it really works.
  The states were the highest form of development – they protected the citizens (or at least were meant to).
  
  The globalist elite hates nation states, now you know why.
- Anonymous on March 02, 2016 · at 12:26 am EST/EDT
  
  I’m describing the underlying nature of the system. The state has been captured.
  - Martin from S.E.B. on March 02, 2016 · at 3:16 am EST/EDT
    
    Yep, ok, then we meant the same.
    I only hinted that it is imho dangerous to call the result still being “states”.
    Because instead of revolting against states we should only revolt against “states”, while demanding back our true states (without double quotes).
    
    The problem is to explain this to Joe Sixpacks …
    - Siotu on March 02, 2016 · at 4:41 am EST/EDT
      
      You won’t be able to explain it simply because your premise and hence conclusions are not correct. Rutger Börjesson’s statement is far closer to the facts of the matter.
      
      Quoting. “The states were the highest form of development – they protected the citizens (or at least were meant to).” This is laughable. Even simple Joe Sixpack would have difficulty falling or such nonsense. He’d identify it as a variant of a well known lie.
      
      It is difficult for an honest person to consider entities (states) which have been responsible for the murders of many many tens of millions of people, as well as the injury, suffering and impoverishment of untold others as a high form of development, let alone the highest form of development. Such entities are barbarous and savage.
      
      Siotu
      - Martin from S.E.B. on March 02, 2016 · at 3:20 pm EST/EDT
        
        @Siotu
        
        > States aka “Such entities are barbarous and savage.”
        
        No, I disagree.
        If you have no state to implement and execute tha laws, you end in a lawless society.
        If you deny that this will be *much* worse and deadlier the, you are probably such a so called “Anarchist”.
        
        My country was very good and fair after all, with all flaws:
        
        Germans miss the ‘good old days’ of the GDR
        https://www.youtube.com/watch?v=rbbWIRhJbgc
        
        DDR Dokumentation “Ost-Berlin – Hauptstadt der DDR” 1973 (10 Min.)
        https://www.youtube.com/watch?v=h5Lf1d4stXk
        
        Maybe you had less luck and hence are so biased against states.
        p.s. Russia is not a state? Do you suggest you hate Russia?
        
        Siotu on March 05, 2016 · at 7:24 pm EST/EDT
        
        Good morning Martin from S.E.B.
        
        Re Russia
        It is a pointless undertaking to “hate” a geographic location. I do not dislike Russia and I do not dislike any Russian I have been fortunate enough to meet and associate with.
        
        Re Berlin
        I visited Berlin last some five years ago (time flies by, it does not feel as if it was that long). There certainly have been changes. I spent much of my time wandering around on foot. The city is full of history but best of all there were many, many interesting people for me to meet. I’ll definitely return for a longer stay.
        
        That there was once a wall built to keep people from expressing their preferences by moving from one jurisdiction to another is telling. It is interesting to consider how it is that when an authoritarian society is set in place people seek to escape it. If they are able to depart easily the authoritarian state soon moves to make it more difficult to so do, much more difficult.
        
        People were not allowed to express their preferences by moving out from the East (examples abound of those who were murdered while attempting to so do). People should have been allowed to express their preferences without the threat of being killed or put in a cage or tortured. Let each move to whichever side was preferable for him or her. Of course the trouble with that is it would mean the collapse of the authoritarian state. So what is preferable, the elimination of a political regime or the elimination of people? Personally, I remain on the side of the people.
        
        Re Anarchy
        The term anarchy refers to the situation where there is an absence of sovereign government. That does not necessarily mean the situation is one of lawlessness or even chaos or violence, although that could occur. Note, for example, that the nation states of the world presently reside in an anarchic situation (although there are those who want to end that and bring about the situation where they are THE world authority, one which trumps all national sovereignty). There are many arrangements available for a society to exist and thrive in the absence of government as presently experienced. Much of the Pacific and S.E Asia operated in anarchic society. In more recent times private governance agreement have been developed. Then there are the traditional arrangements of older societies still in existence. Anyway, the point is that it is not the case that a situation of anarchy necessarily means violence, destruction & death.
        
        Re sovereignty and the state
        Government claims a monopoly across a region or territory to employ violence and coercion. It claims sovereignty over all persons who live there (or who were born there) and demands tribute, or else. Hence the laws it promulgates are at heart formalisations of “stand and deliver”. When you analyse the issue of sovereignty it brings up some difficult questions to be carefully considered. Firstly, a government is a group of individual human beings. Any power the government has or claims it has is nothing more than the expression of power by members of that group of individuals. So where do the individuals manning the government get sovereignty over other individuals from? A common claim is that this sovereignty comes from the people. OK. But how? An individual cannot grant something to another he does not in the first instance possess himself. For example, since no-one has right to enslave another, the right to enslave cannot be assigned to government. And since no-one has a right to expropriate another person’s property, no-one can assign a right to property expropriation either. Further examination soon leads to the conclusion that it is the individual person who is sovereign over his own life. Hence no-one has sovereignty over the life of another. How, then can anyone assign sovereignty over another (a sovereignty he does not himself possess to assign)?
        
        In the end it is difficult to see where the present arrangements derive moral legitimacy. And it is clear that they have been the causal element in more bloodshed, destruction of treasure and resources, impoverishment, destruction of lives, waste and needless suffering then any other source (especially during the last century). Not moral and, taking the attainment of human progress and well-being as the goal, not practical either. Hence I do not concur these arrangements to be a high form of development- rather the opposite as previously mentioned.
        
        Re You!
        I have read your comments ever since first stumbling across this site (I was searching for an honest description and explanation of what was occurring in Donbass at the time). I found what you write to be interesting and provocative of thought (sometimes stimulating further research on a topic). So, please do not take my contribution as if it is intended as attacking your good self.
        
        Siotu
Tony_0pmoc on March 01, 2016 · at 8:50 pm EST/EDT

Cathal,

Whilst I am not too impressed with the headline here, I find your overall thesis, highly refreshing and original, and am already about 10 pages into your book. Yourself and your fellow contributors appear to be describing the world’s economic problems highly objectively, yet from a position of practical experience rather than mere theory.

I hope you have also suggested some possible solutions rather than world war and collapse. However, before anyone can really resolve a problem it needs to be clearly defined and understood, and from what I have read so far, you have made a highly positive attempt to do just that. Well done.

Thank you,

Tony
- Anonymous on March 02, 2016 · at 12:14 am EST/EDT
  
  Thanks Tony,
  
  We’re trying our best. FT readers are quite deeply concerned about the system which we love and is central to our lives. I do accept submissions, but prefer them to come from older Capitalists with an excess of experience over theory.
  
  The Saker asked me to write the above. My intellectual friends did ask me to propose an educational solution. And I do suggest changes to the system framework which I believe will negate the need for war.
  - ioan on March 02, 2016 · at 6:53 pm EST/EDT
    
    Hopefully in the next 50 years or so…?!
Oodnadatta on March 01, 2016 · at 8:58 pm EST/EDT

I used to subscribe to the notion that only war can rebalance the global economy BUT I changed my view on that when it dawned on me that there is another fight on the cards…the fight for survival…we are all in it…we approach the epoch of the Carbon Dollar…where every effort is bent towards its accumulation…where everyone is born with a lifetime budget…where everything is measured against carbon…where what are called asserts today…car….house…utility…all are debt…carbon embodiment/displacement.
- Hayek on March 01, 2016 · at 11:17 pm EST/EDT
  
  Carbon- Atomic Number 6- 6 Protons- 6 Neutrons- 6 Electrons- 666
  Something to wrap the old grey cells around
Uncle Bob 1 on March 01, 2016 · at 9:12 pm EST/EDT

Those major countries where capitalism brought a modern life to most of its peoples today all advanced during the 19th century (so far). Why, one might ask is that so? Its because the “ideology” of that period in time didn’t care about the common people. Capitalism could advance off the “bones” of the working classes without being stopped. Slave workshops,almost slave conditions,in building,and mining businesses, (and actual slavery in some countries) weren’t the concern of any state official. Only a few of the “middle or upper classes” and sometimes the Churches talked about how horrible labor conditions were,and protested them.Charles Dickens stories weren’t just fairy tales in that time.Those conditions were what lead to socialism and social democracy,and then Marxism.

Today (so far) its harder in nations to build modern capitalist economies. Even in some states with almost no labor rights,there are some. And the media’s “do” sometimes report on the conditions (especially if the stories come from countries they don’t like). And the peoples around the World are “aware” (even if they can’t do must about it yet) that those conditions are “wrong” to live under. Unlike in those past days,its not an “acceptable” ideology to treat the workers worse than work animals ,(even though it does happen) anymore.
Suzanne Majo De Kuyper on March 01, 2016 · at 10:34 pm EST/EDT

Please send in more of you insights? And how you educate please.
Anonymous on March 01, 2016 · at 10:41 pm EST/EDT

this is at first glance a plausible explanation of the reality, except it’s wrong. This system can not be labeled capitalism, because, as the author has pointed out quite correctly – capitalism is the economic mode when capital accumulates. But ever since bond market speculation has been invented in 20s, and especially since late 1970s economy is in capital consumption mode. It may seem counter intuitive, but the key for understanding my claim is the dynamics of the interest rate and its consequences. Since the beginning of the records in late 1790s, and up to 1914, the prevailing interest rates were remarkably stable, oscillating rather slowly between 8 and 3.5%, with 5.5-4% range for the most of the period. Rates spiked during WWI, and then started to fall. It’s little known that calamity of 1930s was actually the time of bonanza for bond speculators as rates had fallen to below 2% for 10 year bond, causing bondholder a sizable capital gain amid dying productive enterprises and idle workers turned into Labor Armies by New Deal. After WWII rates started the previously unseen accent towards 16% by 1980. What happened was new rising part of Kondratieff long cycle, when natural flow of money from bonds to commodities was insanely aggravated by central bank interventions, which becomes rampant when the last tinny link to gold was cut off by Nixon administration. Interest rates skyrocket along with commodities prices, as each and every corporation were selling bonds in order to fund inventory accumulation. Rising rates were making more and more businesses submarginal, as their IRR sink below interest rate. The first big swing of rates (upward) caused loss of capital by savers and many businesses. In 1980 this swing had reached saturation zenith and rate begun to descent from 16% toward zero. But falling rates, unfortunately, cause as much harm to capital, business and savers, as rising rates. With falling interest rates structure, businessmen find themselves in the situation, when every bond they sell to finance their business, becomes more and more expensive decision, as time passes and rate becomes lower. Businessman, who sold fixed rate bond at 15%, in few years realizes, that his new competitors could sell their bonds at 10% and gain advantage over him. That’s just a math under debt calculus – if you sold the bond, and rates fell lower subsequently, the market price of your bond goes above par, so the seller of the bond (the entrepreneur) has a capital loss. Modern accounting standard do not oblige the debtor to mark down capital account due to the rise of NPV of his obligation, but the loss materialize anyway, in the form of inadequate amortization of the park of capital tools. 30 years of falling rates has basically wiped out capital of western productive businessmen, while resulted in enormous gains for bond speculators – those who could buy bonds with borrowed money. Savers (pensioners) can not gain out of falling rates, as they hold bonds to maturity, and only suffer, as falling rates cuts pensioners incomes. The system, where main actors of capitalism – entrepreneurs, pensioners, workers, inventors and productive capitalists are all exposed to stealthy accumulating losses, for the gain of bond speculators can not be described as capitalism. It’s central planned warfare/welfare system, where central planning is executed via manipulation with debt-backed “money” in the form of check-kitting scheme between central bank and Treasury, where central bank is relentlessly monetizing the govt debt for the mutual benefit of big government and bond speculators. Bull market in bonds is sucking all the remaining capital into the black hole of negative interest rates. Central bank is trying to cope with the situation by the only response they know – buying yet more bonds. At some point, the natural forces of the long cycle would coincide with artificial impulses of the central bank, causing the resonance. The resonance will wreck the system, which would suddenly seize to exists. Bond values will evaporate and bids for dollars will be withdrawn from the gold market. Speculators would rush into commodities in order to escape bond collapse, and then, bids for dollars will be withdrawn from commodities markets either. The suffering for pensioners (think Baby Boomers) and savers will be enormous.
- Anonymous on March 02, 2016 · at 12:24 am EST/EDT
  
  Interesting comment. I wouldn’t worry about word games as such, Capitalism simply is. If you’d like to expand your post and flesh it out, please write me at haughian@hushmail.com
  I’ll send it to some bond guys and see what they say. If it’s a gem it’ll be added to the 15th edition.
  - Anonymous on March 02, 2016 · at 1:14 am EST/EDT
    
    You better read this: http://keithweinereconomics.com/2013/12/28/the-theory-of-interest-and-prices-in-paper-currency/
Lochearn on March 02, 2016 · at 12:47 am EST/EDT

This is like a Master’s essay. It tries to cover far too much ground and as a result it is full of inaccuracies. Let’s take a few examples:

“The US jacked up tax rates on the wealthy and had a period of elevated inflation in the late 40s and into the 1950s – all of which wiped out creditors, but also ushered in a unique middle class era in the West.”

For the year 1951 you are correct. Inflation levels oscillated between 6 and 8%. But for the rest of the decade they were very moderate – below 3%. This the first I’ve heard of creditors being wiped out in the 1950s.

“GDP in the US increased after 1974 but a portion of end use buying power was transferred to Saudi Arabia. They were supplying the net energy gain that was powering the US GDP increase. The working class in the US began to experience a slow real decline in living standards, as ‘their share’ of the economic pie was squeezed by the ever increasing transfer of buying power to Saudi Arabia.”

No. The petrodollars earned by the Saudis were reinvested through London and Wall Street and were used for high interest loans to what was then known as the “Third World,” earning big bucks for Wall Street. You haven’t mentioned the massive inflationary rises in Opec’s oil prices (though I have my doubts about that it was purely an Opec decision) that put a huge strain on US manufacturing. Also you have not pointed out it was not overproduction that was the problem in say the auto industry or in the electrical goods industries in the US, but competition from Japan and Germany who were producing products of higher quality. So the US did overproduce because they could not sell their crap products. To maintain the rate of profit a full-scale attack had to be launched on workers’ wages and benefits, the New Deal had to be trashed and the stage was set for Wall Street to reemerge in an orgy of leveraged buyouts, junk bonds, shareholder value, etc. etc.

“The application of all these economic methods was justified by the political ideology of neo-Liberalism.”

It was not justified; it was enabled by the political and economic ideology of neoliberalism.
- Cathal on March 02, 2016 · at 6:36 am EST/EDT
  
  Hi Lochearn,
  
  Thanks for your comment. I used language which is understood by non experts.
  “This the first I’ve heard of creditors being wiped out in the 1950s.” The US jacked up tax rates on the wealthy and had a period of elevated inflation in the late 40s and into the 1950s – all of which wiped out (better: slowly sucked out gov bond-) creditors, but also ushered in a unique middle class era in the West.
  
  With respect to recycling petrodollars, I’m sure you appreciate that that is irrelevant to the substantiating the statement: ‘Capitalism Requires World War’
Levi on March 02, 2016 · at 12:47 am EST/EDT

Anybody noticed how jeans are getting cheaper as we get more efficient production and cheaper labour to package. ? No, me neither
- Diaspora_M on March 02, 2016 · at 3:25 am EST/EDT
  
  On the contrary, what you aren’t seeing is a reduction in price of brands. But jeans like jeans you can get a serviceable pair of off brand jeans for 9.99 that are of similar quality.
  
  Your problem my dear Levi is that you want *cough* Levi’s for 9.99 lol and that won’t happen.
  
  Brand name jeans won’t go down in price while there is a demand for them. If people stop buying them then the price goes down. Until such a time if you want cheap efficiently priced jeans well you are welcome to those quick easy to produce quality off brands that will continue dropping in price.
  - Anonymous on March 02, 2016 · at 4:50 am EST/EDT
    
    Diaspora_M
    
    You are correct. Having said that I did get a Rolex for USD30.00 in Thailand. It was a reliable timepiece and I eventually gave it up for double that in beer. Wish I had kept it now, but there you are.
    
    Now you could always buy the cheap jeans and get them to attach a nice label you!
    
    Cheers Siotu
    - Levi on March 02, 2016 · at 1:37 pm EST/EDT
      
      But was that a real Rolex or a knockoff ? . Ah, supply and demand- good old capitalist concepts. Of course currency fluctuations have not been mentioned in the price of the jeans. Surely a mayor point to be missed
- ioan on March 02, 2016 · at 7:03 pm EST/EDT
  
  Levi
  
  Just let me ad: could you find a good quality jeans like back then in the 60,70,80’s ? what you can find is “made in china”,made from recycled envelopes from USA,Japan and Europe.This is the new capitalism we do have today.
Earthrise on March 02, 2016 · at 1:02 am EST/EDT

People are getting caught up on definitions of Capitalism, and missing the point about the cause of world war. After becoming fascinated with war as a child, I have studied long to find the cause. And to my pleasant surprise, Orwell hid it inside 1984, his ‘book within a book’ entitled: THE THEORY AND PRACTICE OF OLIGARCHICAL COLLECTIVISM. I have edited the ‘War is Peace’ chapter down to two paragraphs:

“The primary aim of modern warfare … is to use up the products of the machine without raising the general standard of living. The essential act of war is destruction, not necessarily of human lives, but of the products of human labour. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent. Even when weapons of war are not actually destroyed, their manufacture is still a convenient way of expending labour power without producing anything that can be consumed. In principle the war effort is always so planned as to eat up any surplus that might exist after meeting the bare needs of the population. War, it will be seen, accomplishes the necessary destruction, but accomplishes it in a psychologically acceptable way. In principle it would be quite simple to waste the surplus labour of the world by building temples and pyramids, by digging holes and filling them up again, or even by producing vast quantities of goods and then setting fire to them. But this would provide only the economic and not the emotional basis for a hierarchical society.

But it was also clear that an all-round increase in wealth threatened the destruction — indeed, in some sense was the destruction — of a hierarchical society. For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. It is deliberate policy to keep even the favoured groups somewhere near the brink of hardship, because a general state of scarcity increases the importance of small privileges and thus magnifies the distinction between one group and another. And at the same time the consciousness of being at war, and therefore in danger, makes the handing-over of all power to a small caste seem the natural, unavoidable condition of survival.”

It’s the class war, stupid.
- Anonymous on March 02, 2016 · at 2:34 am EST/EDT
  
  I use some wisdom I gained from Matthew; to discover the false prophet you don’t listen to what they say, you don’t even count what they do, but what is the effect of their actions. For years I have been getting this bad feeling that the imperial governments in WWI were intentionally culling their own populations through war, forcing the prols to kill each other while the ruling class rubbed their hands. That generation was far more politically aware and active than we are, children of strong revolutionary currents that built up over the previous century. Europe was on the verge of massive popular revolutions again their imperial governments, and without the war there is a good chance popular Socialism would have exploded across the West. Even during the war Russia revolted, with failed attempts in Ireland and Germany. The world wars were not between governments, but against us for having the gall to become educated and emancipated. All the signs are here now; the wealth disparity, the rising new powers, growing popular discontent, insolvent banks, the 1920-30’s all over again. We know how this ends, enormous slaughter and destruction the like we have never seen. Why should the people of the world fight each other when our enemy is living in a mansion on the hill behind us? As they used to say in the 60’s, we need to make this happen this time:
  
  “What if they gave a war and nobody came?”
  - Siotu on March 02, 2016 · at 5:07 am EST/EDT
    
    What are you talking about? For a start the so called wealth disparity has not altered in hundreds of years. It follows a Pareto distribution which has remained consistent for a very long time. Note that in all that time standards of living have been rising for more and more people. Long may that process continue.
    
    Siotu
    - Earthrise on March 02, 2016 · at 5:33 am EST/EDT
      
      Siotu,
      
      I wrote the above reply, I forgot to put my name on it. Wealth disparity, in the USA in particular, is the worse since the Great Depression. All the FED QE policies and banking bailouts has even further shifted wealth up to the 1%. I thought this knowledge was a given.
      
      “A new study shows that the gap in the wealth that different American households have accumulated is more extreme than any at time since the Great Depression”
      
      http://fortune.com/2014/10/31/inequality-wealth-income-us/
      - Siotu on March 02, 2016 · at 8:51 am EST/EDT
        
        Hi Earthrise
        
        Yes, it is indeed a “study” and it includes estimates and evaluations and aggregations and manipulations of selected data. It would pay to get a copy and go right through in detail to analyse the methodology employed and the presuppositions embedded within the treatment of the selected data set (as well as why that particular selection was made). Unfortunately the linked article does not disclose this in any detail although it does mention some items in passing. What it is safe to conclude is that the study is a subjective assessment and is definitely not impartial.
        
        While there have been some modest movements over the last few hundred years the fact remains that the distribution of wealth follows a Pareto distribution and does not vary far from it for very long. BTW remember to always be very careful how you define and measure economic data (such as wealth), especially when it comes to use of aggregates.
        
        Final point. It is unimportant whether there are individuals or families whose wealth exceeds ours (yours or mine). It is vital to avoid “envy of those who are better off” or who “have more”. It is a terrible (and invalid) approach to presuppose one’s analysis with envy. The important issue isn’t whether Pareto’s distribution of wealth is evident. It isn’t even what the distribution of wealth is at all. It is whether or not living standards are improving. For the most part they have been.
        
        Siotu
        
        Ewan on March 02, 2016 · at 2:56 pm EST/EDT
        
        Siotu
        I’m very willing to be corrected, but…
        
        I thought a Pareto equilibrium was one in which no economic agent could improve their lot without cost to another. There is a series of such equilibriums (I’m campaigning against “equilibria” coz this is English not Latin). Some will accord with some notions of economic justice (whatever that is defined to be). Others will not. That the economy is at a Pareto equilibrium (if it were ever possible to demonstrate as much) would not be a reason to accept the distribution of wealth associated with that equilibrium.
        
        Paul Cockshott on March 02, 2016 · at 10:46 pm EST/EDT
        
        Income distributions
        As the Russian Physicist Yakovenko showed income distribution has two distinct functional forms, for the 99% it follows a Gibbs Boltzmann distribution ( negative exponential ) for the 1% it follows a power law distribution ie a long tailed distribution which is much more unequal than could arise by chance. These functional forms can be stable ( which is all that the claim about Pareto distributions amounts to) but a stable functional form is consistent with a change in the degree of inequality if the parameters of the function change.
        http://online.itp.ucsb.edu/online/colloq/yakovenko1/pdf/Yakovenko.pdf
        
        Anonymous on March 02, 2016 · at 11:23 pm EST/EDT
        
        Hi Ewan
        
        I refer to Pareto distribution, not equilibrium. They are different concepts.
        
        The major issue overlooked by those envious of people with more wealth than themselves is the standard of living. It matters not who has more wealth than I since my situation is improving. Indeed the standard of living I now enjoy is superior to that of my parents and grandparents. Certainly it is a vastly major improvement over the living conditions endured by generations of honourable ancestors.
        
        Recently I was in China again. The improvements for tens of million of people in such a short period of time is miraculous. That is what Capitalism has wrought for them. More of it. Bring it on I say. The alternative is envy, and impoverishment for the sake of twisted ideologies.
        
        Siotu
        
        Uncle Bob 1 on March 03, 2016 · at 1:08 am EST/EDT
        
        In all this conversation (multiple comments back and forth) I’ve noticed a few things. First,that the World over centuries ,and under all systems,has advanced in society. At one time our ancestors hunted animals for food with spears (and even rocks). And for a while eat raw meat. Then we advanced to fire. And making clothes. We lived it caves. Then we went to building huts. And later houses,etc,etc,etc. When you talk about “advances”,none of the modern ones were as much “life changing” progress as those were. So yes,modern civilization has advanced. But its not “necessarily” true it advanced “because” of capitalism alone. Certainly there have been advances with more people having “gadgets” in capitalist countries today than in the past. But at what “cost” as that been. And what peoples have seen those advances for themselves.Certainly few would be able to claim that people,other than the rich and middle-classes,are better off in Africa than they were.And I’d also think that is true of many areas of Asia and Latin America too. Having “cell phones and TV’s available aren’t what I’d consider great advancement.Having decent jobs,housing,security,medical care. Those are my measures for advancement and a better life for people.
        
        One might say,yes, consumer goods are better now than in the past.But for untold millions that’s only because of the social programs put into place by social reformers in the past. Before social security (that socialist program that everyone is able to have),people literally starved to death in the US and other Western states.Today,that doesn’t happen because of the “food aid” in different countries.Many enjoying the “advances” you talk about would loose them overnight if a “real” total capitalist system was in place. Also,when I was a child,a workingclass family was able to live off the salary of one member having to work (the husband usually). The wife was able to do the house duties and raise the children. Today in almost all families both are forced to work to afford a decent lifestyle for their families. I don’t see that as an “improvement”. Yes,they may “together” make more money and have the ability for a few more “gadgets”. But at what cost to families and society as a whole.
        
        Second,the argument you put forth I’ve seen put forth for centuries. Its been especially put forth by religions. Suffer now,you will have a better life in heaven (or in your case “in the future,with capitalism”). It’s worked on the masses of humanity since time began.But every once and a while people wake up from the dream and ask themselves “why do we have to suffer now”. And “why do we let other human beings control our lives like that”.
        
        You might also want to reflect on the fact that the country that has made the most advances to bring people out of poverty is China. A China,that while having a capitalist economy in most ways. Also is guided by socialist ideas. A comparison might be made with capitalist countries like India,Indonesia,Pakistan,Bangladesh,etc. Countries also capitalist,with huge populations. And not guided by socialist ideas.The level of poverty in those states is heartbreaking, for all but the favored classes.Certainly there are gleaming city towers,nice cars on the roads,etc. But that is a long way from the essentials needed by a nation’s “people” to have advancement.
        
        Ewan on March 03, 2016 · at 9:16 am EST/EDT
        
        Siotu
        My mistake (well, ignorance actually). I should go study, but your thoughts would be interesting. – Is it Pareto’s contention that there is an underlying mechanism causes any and all economies to tend towards this distribution of income? and is there therefore no point talking about social justice? why would progressive taxation, for instance, not counteract the iron law? If, for example, the distribution of income in the world were such that the richest three hundred owned more than the poorest three billion, and one billion of those suffered malnutrition, would it be worth asking the question?
        
        (What is the relationship between Pareto distribution and Pareto equilibrium? Does the former constrain the latter?)
    - Earthrise on March 03, 2016 · at 2:37 am EST/EDT
      
      Thanks everyone,
      
      The politics of envy is a ruling-class meme, designed to excuse their excesses and paint everyone else as nothing more than jealous of their ‘earned’ success. I use Dawkins’ evolutionary philosophy to understand human nature (as you can tell by my use of the word ‘meme’). Puppies fight for access to their mother’s teat, the one that misses out (the ‘runt’) typically dies. All of us are descended from non-‘runts’, as our ancestors survived to reproduce. We are all then genetically-programmed to fight for our fair share, to our genes it is a matter of survival. When we see people living large up on the Hill, it triggers a genetic response to fight for our share. This is made exponentially worse because capitalism through advertising and media content is bombarding us with images of people doing better than we are, it effects us all psychologically to ‘keep up with the Jones’. Now that the ‘American Dream’ is no longer possible, this causes depression, drug use and crime as ways of dealing with the psychological pressure.
      
      The politics of envy is blaming the victim and as with all dominant class memes, denies the systemic reasons for individual behavior. This is one of the main reason some kind of socialism is necessary, or we are building social collapse into the foundation of our society.
      
      When all the puppies have a teat, there is no fighting.
Peter AU on March 02, 2016 · at 2:15 am EST/EDT

Greed, arrogance, aggressiveness are the cause of wars. US style capitalism as an ideology certainly includes all these human traits, but it is the underlying human character (of the top players?) rather than capitalism as such that causes wars.
- Earthrise on March 02, 2016 · at 5:40 am EST/EDT
  
  Peter,
  
  I used to think this, we are meant to. But something bigger than individual human nature is at play here. The machinations of the ruling class (the 1%) is a more comprehensive answer. While Greed, Arrogance and Aggressiveness are all factors, the gaining and preservation of privilege and power is more accurate. We imagine international relations are governed by the same motivations as between neighbours in our suburb. But instead it is an order of magnitude more evil than most of us can possibly imagine. And they count on that too hide what they do.
- Anonymous on March 02, 2016 · at 1:28 pm EST/EDT
  
  Debt and economic decline are the cause of most mayor wars in history. Fact
plainsman on March 02, 2016 · at 2:41 am EST/EDT

why is everybody anonymous? is it that gd hard to just say I am dog or nebbish or something? this is a fairly interesting thread in which the comparative views are obscured by a whole field of nobodies who are not the same writer. pathetic.
- Siotu on March 02, 2016 · at 4:56 am EST/EDT
  
  I agree with you. It is more difficult to follow the conversation than it ought to be.
  
  Regards
  
  Siotu Mara
- mmiriww on March 02, 2016 · at 6:18 am EST/EDT
  
  The system should use the ip address as a seed to a random number generator that selects one of 256 arbitrary names. So we would know if the same person is replying or not. Right now you don’t know who is replying to whom and if the same guy is just questioning and answering himself.. A self deluded crosstalk with themselves. Interesting is a psychological way but confusing as hell for the rest of us.
Charles Fasola on March 02, 2016 · at 4:08 am EST/EDT

The author makes more than a few historically inaccurate statements and a few misleading ones. Some of his analysis is simplistic at best. He lacks an understanding of money, what it is and its history. He seems to believe a gold standard is the be all and end all of our economic maladies. Most importantly he fails to understand a simple truth, it’s not the quantity of money (capital) that matters most, it’s what is done with it.
- Cathal on March 02, 2016 · at 6:48 am EST/EDT
  
  Charles, the purpose of the article is singular. It is only meant to show you the capitalistic cycle that leads to a Third World War. The mentioning of ‘money’ is used to highlight the evolution that has occurred; and why and what the Shanghai Group intend to now do.
John G on March 02, 2016 · at 5:39 am EST/EDT

Central banks/government currency issuers cannot be insolvent in their own currency.

Sorry, but the economics in this piece is incoherent.
- Cathal on March 02, 2016 · at 6:49 am EST/EDT
  
  Hi John,
  
  I’m not aware I asserted that?
- Anonymous on March 02, 2016 · at 8:57 am EST/EDT
  
  central bank can go bankrupt in its own country, mechanics is simple – when yields on bonds becomes negative, assets of a central bank (bonds) become producing negative cash flow. Central bank can pass that loss to its own depositors, but to a limited extent. Soon enough, equity of the bank would be wiped out.
  - John G on March 02, 2016 · at 4:53 pm EST/EDT
    
    A central bank has no equity issues and any losses are irrelevant. It is the currency issuing arm of the government.
    - Anonymous on March 02, 2016 · at 7:54 pm EST/EDT
      
      Central bank has equity issues as any bank. Its assets are government bonds and its liabilities are banknote cash and deposits. Equity of central bank is very small, leverage high. When (not if) bond market collapses, so do liabilities of the central bank. Government can not change laws of physical world.
      - John G on March 03, 2016 · at 6:01 am EST/EDT
        
        Central banks are not like ‘any bank’. In fact they’re not banks at all.
        
        You don’t know what you’re talking about.
        
        Anonymous on March 03, 2016 · at 12:18 pm EST/EDT
        
        Then why are they called “Banks” .
        
        AEM on March 03, 2016 · at 1:15 pm EST/EDT
        
        Is a central bank not banker to the banks?
        
        John G on March 03, 2016 · at 5:39 pm EST/EDT
        
        What we call central banks are where the government and the banking system interact and the banks interact between themselves.
        
        They are just a spreadsheet operation and they could just as easily be an office within Treasury.
        
        Anonymous on March 03, 2016 · at 6:19 pm EST/EDT
        
        Just a spreadsheet operation . Looks like a bank, smells like a bank, well good lord it’s a Bank .
        
        John G on March 04, 2016 · at 5:26 am EST/EDT
        
        “Looks like a bank, smells like a bank”
        
        Well they don’t look or smell like banks when you understand what they actually do. Rather than the fantasies of mainstream ‘economics’.
        
        AEM on March 03, 2016 · at 6:30 pm EST/EDT
        
        Or, just as easily, a clearing house organised by the banks themselves. A bank for the bankers. A central bank has its advantages – fully backed by the government’s tax-raising powers. Also drawbacks – makes it easier to monetise the government’s debt. A private clearing house concentrates the minds of those who finance and use it. That is essentially the argument for free banking.
        
        John G on March 04, 2016 · at 8:56 pm EST/EDT
        
        The central bank deals in monetary policy only. Taxation is a fiscal operation. Central banks don’t require ‘backing’ in any sense.
        
        “monetising” is a loaded term that doesn’t apply in the post gold standard world.
        
        Free banking is a pipe dream.
        
        AEM on March 04, 2016 · at 10:56 pm EST/EDT
        
        The central bank is responsible for monetary policy and for the smooth functioning of the banking system. A central bank, as banker to the banks, ensures sufficient liquidity to the banks. For example, if a bank relies on the money markets to cover its short term liabilities, and the money markets dry up, the central bank can extend it credit, so it doesn’t have to close its doors just because it is temporarily illiquid though solvent. The central bank has the resources to guarantee liquidity to the banking system because it is a part of government and backed by the government’s tax-raising powers. A private sector clearing house would only have such resources as the banks themselves put into it, which tend not to be of similar magnitude to the resources the central bank can call on.
        
        In a gold standard there is no scope to monetise government debt. Fiat money allows the government to do so.
        
        John G on March 05, 2016 · at 3:33 am EST/EDT
        
        It has nothing to do with taxation. The central banks’ ability to create reserves is infinite and entirely separate to fiscal policy.
        
        AEM on March 05, 2016 · at 10:02 am EST/EDT
        
        John G
        “Absent taxation, there would be constant runaway inflation.”
        
        In other words, the central bank only has the resources to guarantee the banking system if it is backed by the government’s powers of taxation. The alternative could be inflation (depending on the circumstances at the time of the bank collapse) or even hyperinflation (in extreme circumstances).
        
        John G on March 05, 2016 · at 8:07 pm EST/EDT
        
        “In other words, the central bank only has the resources to guarantee the banking system if it is backed by the government’s powers of taxation.”
        
        No. The central bank has unlimited capacity to create reserves with no direct link to the fiscal operations of treasury.
        
        The treasury has the spending power.
        
        AEM on March 05, 2016 · at 10:54 pm EST/EDT
        
        John G.
        I’ll say this and then give way to the moderator’s silent plea that we give it a rest.
        
        You have said that the central bank might as well be in the Treasury (there is nothing to separate the operations of one from the other). You have said that the central bank has no direct link to the Treasury (and certainly not to its “fiscal operations”). You have said that the central bank can create money without limit. You have said that without taxation by the Treasury (i.e. without its fiscal operations) unlimited creation of money would cause a continuous rise in inflation.
        
        This will not do. You cannot continue to bluff your way out of contradictions with mere slogans, in this instance or in all the others (it’s all a flow, don’t you know). Or, at least, you can try, but you would be better employed studying some economics (beyond your current cultish comfort zone).
        
        John G on March 06, 2016 · at 1:38 am EST/EDT
        
        Yes, I rather thought this AEM character was you, Ewan.
        
        Still swinging with the concern trolling I see.
        
        If you had a cogent argument, you’d have no need to misrepresent.
        
        As in the last thread that you trolled on, you are deliberately conflating reserves with Treasury spending.
        
        I know from past experience that giving you specifics will not make one iota of difference as you will ignore the distinction and create further strawman arguments in your effort to censor and derail debate.
kynikdog on March 02, 2016 · at 8:02 am EST/EDT

Pretty comprehensive analysis. Good stuff. The question left unaddressed pertains to what Marx termed `fictitious capital’. This is the sort of capital of enormous proportions that has grown in the west. Its source is speculation and its instruments including leveraging assets [ for short term profits] and the massive expansion of the the sphere of derivatives linked to finance capital per se. A vast army of secondary sector workers are paid to keep it going, cooking up accounts and broadly operate in the sphere of circulation. In the least, this needs to be integrated into the account of the capitalist war economy.
- Cathal on March 02, 2016 · at 12:52 pm EST/EDT
  
  Hi kynikdog,
  I touched on it. The de-linkage from gold removed the external anchor that limited deficit spending and war financing. The economic result has been different in different places. The book explores these differences. The PDF is free, enjoy.
  - Anonymous on March 03, 2016 · at 6:07 am EST/EDT
    
    Why would we wish to limit deficit spending? Gold never limited war spending. They just went off gold when they needed to.
    
    The gold standard is just an excuse to limit social spending.
Soulipsis on March 02, 2016 · at 8:42 am EST/EDT

Sadly, there is no mention here of moral reform of the capitalist class, little hope to inspire them to act for the greater good rather than for the spiritually small and divisive toxic hyperindividualism that has caused so much pain. I think a filmmaker might create something to appeal to their humanity, to address the twisted myths and fantasies that prompt their savage psychopathy, and redirect them to a more inspired and beautiful cause than mere self enrichment.
- Cathal on March 02, 2016 · at 12:55 pm EST/EDT
  
  Hi Soulipsis,
  Your comment is interesting. It reminds me of some of the entries in the chapter entitled ‘What is The Nature of the Financial Sector?’ Enjoy, though it is a sobering book.
  - Hayek on March 02, 2016 · at 1:47 pm EST/EDT
    
    I would suggest that you read the New Testament and the life of Jesus Christ. All your concerns are addressed and answers given for the problems you see. After all , there is nothing new under the sun.
    - Cathal on March 02, 2016 · at 4:20 pm EST/EDT
      
      Hi Hayek,
      I know my Bible. My father was a Cistercian monk, for 7 years, before marriage. Several chapters in the book explore the relationship between Capitalism and Religion.
      Here’s a short extract http://beforethecollapse.com/2016/02/19/christianity-is-the-only-path-to-individualism/
      
      The relationship between God and Capitalism is explored in the final chapter. I’d appreciate any constructive feedback, write me at haughian@hushmail.com
      Cathal
      - ioan on March 02, 2016 · at 7:26 pm EST/EDT
        
        Your Bible is the Mammon and Jesus Christ the Lord has nothing to do with him.Most of Russians will agree with that.
  - soulipsis on March 02, 2016 · at 6:43 pm EST/EDT
    
    Thanks for the compliment. I guess you mean your Philosophy of Capitalism book?
- GrandmaR on March 02, 2016 · at 6:22 pm EST/EDT
  
  Consider :
  
  http://www.ponerology.com/evil_1.html
JF on March 02, 2016 · at 3:02 pm EST/EDT

Very interesting indeed. I am curious whether you are familiar with William F. Engdahl and his research and writings on the a-biotic theory of the origin of petroleum?

http://www.engdahl.oilgeopolitics.net/Geopolitics___Eurasia/Peak_Oil___Russia/peak_oil___russia.html
Don on March 02, 2016 · at 3:26 pm EST/EDT

I like your analyses. I don’t know about “require”, but clearly “desire” seems to be true. I also see the present glut of oil an opportunity for the oil rich to grab up the alternative energy resources in development for a bargain price.
BRF on March 02, 2016 · at 3:46 pm EST/EDT

Excellent piece I find very hard to argue with. The Rothschilds who have been around for a bit, and who should know, have given this cycle in capitalism a term. The call it “the red symphony”.
Rick on March 02, 2016 · at 4:14 pm EST/EDT

The mechanism by which capitalism causes world war has been known for a long time. Capitalism is based on accumulation of money to finance production. This accumulation involves debt leading to investment. Profits are then hoarded by the capitalist by sinking them into non-productive assets such as mansions, etc., leaving a net deficit of cash to repay the debt. So the nation caught up in this cycle must invade and pillage its neighbors to get out of its self-created bankruptcy. Keynes understood this so advocated the nation-state borrowing from its future to generate the needed funds. But you can only borrow so much and so long before you are back where you started. Hence all capitalist nations are cannibalistic. World war follows as night follows day. The West needs to eat any nation it can get its hands on. Ukraine is currently being feasted upon.
Israel Cisternas on March 02, 2016 · at 6:06 pm EST/EDT

I’v come to the conclusion that this article is deceptive attempt to blame the problems of socialism onto capitalism. There is no such thing as ‘debt-capitalism’ what your talking about here is public debt which is called socialism (you know the public ownership of debt?)
- Rick on March 02, 2016 · at 10:15 pm EST/EDT
  
  Go read John Maynard Keynes.
  - Anonymous on March 03, 2016 · at 12:14 pm EST/EDT
    
    John Maynard Kyenes is a socialist. Read up bud. Whoever uses the state to fund there business are not capitalist. And the bailouts are socialism.
  - Israel Cisternas on March 03, 2016 · at 12:50 pm EST/EDT
    
    And if you’d like to properly Educate yourself on Capitalism then heres some Info: By Llewellyn H. Rockwell Jr.
    https://mises.org/library/legitimacy-capitalism
    
    Here about why the Roman Empire fell: By Jesús Huerta de Soto
    https://mises.org/library/socialism-and-decivilization
    
    Cheers,
Anonymous on March 02, 2016 · at 6:48 pm EST/EDT

Furthermore, the current crises in the middle-east has hampered trade with the citizens of these countries. A few examples are turkey which had tourism and trade with Russia and other countries. But now with all these state-sponsored wars instability in the region tourism has been hampered and state restrictions have been imposed on citizens traveling to certain countries.

These wars are not the result of capitalism but of state-socialism. You know when the state gets into debt because it promises this group and that group of people all these so called free goodies. And this socialist system gets into debt who pays the bills you and if not you future generations and the stupid cycle goes on. And when they get into wars who pays for it? Its a socialist system because it is ‘debt’ socially owned. And that debt becomes every bodies debt because the state says so. And if you dear not pay your taxes you’ll get jailed. And that is the story of your happy socialist Utopian state. cheers :D
- Earthrise on March 03, 2016 · at 2:50 am EST/EDT
  
  Anonymous,
  
  Who did the US government bail out in 2008? Who has benefitted from the Fed’s Quantitative Easing program? Who gained from all the corporate and banking deregulation over the last decade? The only people benefiting from state socialism in the West are corporations and the banking sector. The rest of us are getting austerity and poverty.
  - Anonymous on March 03, 2016 · at 12:10 pm EST/EDT
    
    All that you just described is Socialism, in capitalism there is no such thing as society (meaning socialism) bailing you out.
    
    Israel,
- John G on March 03, 2016 · at 6:42 am EST/EDT
  
  So called ‘government debt’ is not a liability of the private sector. It is a liability of the government and thus an asset of the private sector.
  
  Simple balance sheet accounting.
  
  You can stop worrying now.
  - Hayek on March 03, 2016 · at 12:35 pm EST/EDT
    
    Bunch of rubbish- Who is the Goverment ? What are the purpose of taxes. To pay for Goverment and the liabilities which Goverment incurs . It is “Simple balance sheet accounting” which the masters of the universe inflict on the productivity of the working man and then give us garbage statements like- It is a liability of Goverment and an asset for the rest of us ! . The simple fact is that math always trumps economics – 1+1=2. When you spend 3 that makes 2-3 = -1 That never changes. The minus 1 is now a asset of the private sector. It is no wonder the world is bankrupt when we are fed assine tripe like this
    - John G on March 03, 2016 · at 5:46 pm EST/EDT
      
      The government is the state i.e. a sovereign legal entity.
      
      Taxes serve to drain the high powered money that government has spent into the private sector from the private sector i.e. to manage demand and stop inflation.
      
      The state is the currency issuer. It creates the money that the private sector uses. The ‘debt’ is the amount of state money that remains untaxed (as yet) in the non-government sector at any given time.
      
      It is thus a non-government sector asset.
      
      Simple balance sheet accounting.
      - Hayek on March 03, 2016 · at 6:49 pm EST/EDT
        
        Another fantasy.The Goverment is going to manage the business cycle. I think you need to read Adam Smith. The single purpose of taxes is to keep Goverment running. You seem to imply that Goverment creates the wealth that it then needs to manage to keep the economy in balance. Why does the US Goverment borrow 40% of every dollar it spends ? To keep itself running.You claim that this “debt” is an asset! In your accounting fantasy it maybe ,but to all the poor working suckers in the world it is money that has been spent and the taxpayer gets the bill he must pay with is sweat to the crony capitalist bank/politicians who treat us as economic serfs and feed us garbage like “simple balance sheet accounting”. When you spend what you don’t have it is called Debt.
        
        John G on March 04, 2016 · at 5:23 am EST/EDT
        
        I had to read Wealth of Nations long, long ago. I’m pretty sure you haven’t.
        
        Government spending creates the dollars that pay the taxes and buy the bonds.
        
        When you say “accounting fantasy”, you mean maths.
        
        I understand that maths is inconvenient to your wild theories about money.
        
        But there you have it. What is, is.
        
        Taxes pay for nothing.
        
        AEM on March 04, 2016 · at 2:45 pm EST/EDT
        
        You say that the government creates the money out of thin air and uses the money to appropriate real resources. That’s one way. If the government issues bonds which the private sector buys, the private sector lends the government claims over real resources (i.e. postpones its own use of real resources) – the government uses those claims to appropriate real resources – and the government repays on maturity with money received in its on-going activities or created out of thin air. If the private sector pays taxes, it hands over claims to real resources which the government uses to appropriate real resources. Three different ways to the same result – the government appropriates resources otherwise used by the private sector. The different ways the government finances its appropriation may have different effects on the behaviour of the private sector, but in each case the government has appropriated real resources. The limit on such appropriations is surely the real wealth and output of the economy. Do your accounting identities not risk obscuring what is going on in the real economy?
        
        John G on March 04, 2016 · at 8:31 pm EST/EDT
        
        AEM “Do your accounting identities not risk obscuring what is going on in the real economy?”
        
        Not at all. They are a window into what is going on in the real economy.
        
        AEM on March 04, 2016 · at 11:00 pm EST/EDT
        
        So far you have only appear to have described paper transactions, not the transfer of real resources from the private to the public sector. Spell it out for me (if you have the patience).
      - Israel Cisternas on March 03, 2016 · at 7:07 pm EST/EDT
        
        The government is a territorial monopolist of compulsion, an agency that engages in institutionalized property rights violations and the exploitation in the form of expropriation, taxation, and regulation of private property owners.
        
        States however have degrees of sovereignty in terms of how well they represent the will of the population they clam to have sovereignty over.. An example would be the Syrian government. They may be imperfect in the way they rule but are more representative then lets say if the US claimed to represent the will of the Syrian people.
        
        I think a big problem that we see now in the middle east is that very bad states like the US. are fighting for control of resources and power against other states. And sense the nature of the state itself based on force, plunder, and expropriation its you would say the natural nature of the state to be at war and conflict because this is how the state expands and gains more power.
        
        If you’d like to learn a bit more on this topic these are good sources of information.
        https://mises.org/library/democracy-war-and-myth-neutral-state
        
        https://mises.org/library/banking-and-state
        
        Cheers, :]
        
        John G on March 04, 2016 · at 5:30 am EST/EDT
        
        These ‘bad states’ have been taken over by capitalists and are doing their bidding.
        
        mises.org is a source of fantasy and mainstream voodoo masquerading as economics.
        
        If you want to be a dupe of big business keep reading them.
        
        I’ll stick to the real world, thanks.
  - Israel Cisternas on March 03, 2016 · at 12:43 pm EST/EDT
    
    John G, once private debt is public it is no longer private. And your confusing private individual debt with government debt. Tell me did you John G make a private contract with the state to take this bailout debt on to yourself? I’m guessing not. I mean who in there right mind would? What the government did is force this debt on to the people which is a crime and socialism. You know socialized loses.
    
    here is no such thing in capitalism as private gains and socialized loses. In capitalism there is only private gains and private loses.
    - AEM on March 03, 2016 · at 1:21 pm EST/EDT
      
      Israel
      Do you not risk defining your “capitalism” out of the real world and into some hypothetical ideal world? Capitalism is founded on the rule of law and on trust. Its markets are regulated. It relies on government for policing, defence, and some other public goods capitalists prefer everyone else pay for them. “Free market” capitalism is a limiting ideal case that is never found in the wild. And there are only individual humans to act as economic agents if they have been socialised.
      - Anonymous on March 03, 2016 · at 2:54 pm EST/EDT
        
        Capitalism is, I have something,you want it, what will you give me that is a benefit to me. Let’s make a deal. What does Goverment and law have to do with this, except try to cut themselves a piece of the transaction and create socialism in the process
        
        AEM on March 03, 2016 · at 4:35 pm EST/EDT
        
        Did you make the “something”, who taught you, what did you make it with, did you yourself make the whatever you made it with or get it from someone else, did anyone make it with you, did you have to build a factory, who built it with you, how did you pay them before you had made and sold the “something”, how did you fend off the guy who’s bigger than you who thought he could, how did you find the person you think wants the “something” you have to offer, do you want what the person has to offer in exchange etc. etc. etc. Life was more sophisticated than you describe it even before we left off being roaming bands of hominids.
        
        Anonymous on March 03, 2016 · at 7:36 pm EST/EDT
        
        And then came the Lawyers
        
        John G on March 04, 2016 · at 5:56 am EST/EDT
        
        “Capitalism is, I have something,you want it, what will you give me that is a benefit to me.”
        
        No. That’s barter. Nothing to do with capitalism.
        
        Capitalists seek to accumulate financial assets. Governments are the creators of financial assets.
        
        AEM on March 04, 2016 · at 9:48 am EST/EDT
        
        The government creates equities, convertibles, corporate bonds, and their derivatives?
        
        AEM on March 04, 2016 · at 1:37 pm EST/EDT
        
        What capitalists want, like everyone else, is claims on purchasing power. Underneath all the paper transactions is the real economy.
        
        Hayek on March 04, 2016 · at 2:40 pm EST/EDT
        
        When I trade 50 chickens for 4 goats knowing that I can trade 2 of the goats for 40 chickens with another entity this is free market capitalism. What exactly has the Goverment created to facilitate this transaction- Zero.
        
        AEM on March 04, 2016 · at 4:43 pm EST/EDT
        
        Hayek
        Just try telling that story again, but this time include every good and service you have used, enjoyed or consumed or intend in future to use, enjoy or consume, in coordination with everyone else in the economy you operate within. You will then get a better notion, I suggest, of the problems inherent in barter ina modern high tech economy (any economy that has developed since the invention of agriculture 30 000 years ago).
        
        Anonymous on March 04, 2016 · at 8:49 pm EST/EDT
        
        Of course AEM, obviously the means of transacting business have changed with the times but according to John the Goverment injected high powered chickens into the public sector and then withdraws them through confiscation ( taxes ) to regulate the supply and demand of chickens and goats. Let’s be clear, we are talking about something which is a means of trade and a store of value-chickens and goats. The Goverment has absolutely nothing to do with creating either the chickens or the goats. Therefore the Goverment is not the sole creator of stores of value. Quite the contrary, they have given themselves the monopoly on producing” money” and consequently debasing the store of value in the private sector through the issuance of debt which must be financed through the devaluation of everybody’s store of wealth. Of course John will tell you that the books always “add up” but he doesn’t tell you that your asset in going down in value. All smoke and mirrors from the masters of the universe because we little people are too stupid to figure it out. Just remember-The Arc was designed built and sailed by amateurs and the Titanic was designed built and sailed by professionals
        
        AEM on March 04, 2016 · at 11:15 pm EST/EDT
        
        Sorry, I’m getting confused with all these Anonymouses or Anonymice
        
        I think I mistook what you were saying.
        
        I’ll carry on regardless. Money is one of the technologies that facilitates exchange in the more complex economy we all agree we now live in. It is one of rules that helps everyone – except free riders (in this case counterfeiters and fraudsters). An advanced economy needs rules. It needs economic actors socialised to follow rules. It needs enforcement of rules. Law and law enforcement are public goods. Law enforcement is best devolved on a public authority. Money is arguably also most efficiently produced by public authority, although there are also strong arguments for “free money” – that is money issued by banks backed by the credit of the banks not the government. It didn’t work so well in the 19th century, but there are schemes that might well work well. I could continue this story indefinitely – government is a necessary part of a modern economy. Government has to be paid for – by “confiscation” as you say. Seignorage from fiat money is one way to raise some of the tax. Taxation is only sinister, as I believe Americans insist, without representation. When government can’t tax or borrow enough, it can for a time use money creation (the “printing press”) and extract an inflation tax. There are limits – eventually in extremis there will be hyperinflation. Our Modern Money Theory friend will tell us about his conjuring trick – but in the real world this is how it works.
        
        Hayek on March 04, 2016 · at 3:11 pm EST/EDT
        
        And why exactly does the IRS tax barter transaction as financial transfers ?
      - Anonymous on March 03, 2016 · at 4:12 pm EST/EDT
        
        You got it wrong government relies on capitalism capitalism on the other hand doesn’t need government. Governments just want a piece of the action. :]
    - John G on March 04, 2016 · at 5:36 am EST/EDT
      
      Israel Cisternas
      
      The private sector is not responsible for ‘paying off’ so called government debt.
      
      You can relax.
      - Hayek on March 04, 2016 · at 1:06 pm EST/EDT
        
        There you have it folks- one of the masters of the universe telling us not to worry, Goverment will pay off its own debt . Our taxes are for, well what are they for? Oh that’s right, our benefit. The theft of our labour by Goverment through taxation is for our own benefit. Tell me John G, which Goverment in history has ever paid off its own debt?
        
        John G on March 04, 2016 · at 8:24 pm EST/EDT
        
        So called government debt is the accumulated savings in government money of the non-government sector.
        
        Government creates its own money when it spends into the private sector, by marking up bank accounts, and it destroys that money when it taxes, by marking down bank accounts.
        
        What it hasn’t destroyed by taxation is the ‘national debt’ i.e. merely the government money remaining in the system.
        
        The non-government sector buys government bonds with those excess reserves.
        
        Absent taxation, we would have constant runaway inflation. Without government spending we would have no money.
        
        AEM on March 04, 2016 · at 11:32 pm EST/EDT
        
        Savings are consumption postponed in expectation of more consumption in future – which expectation will only be fulfilled if the savings earn a return greater than the time value of money (empirically we tend to prefer money now to money some time in the future and want compensation to persuade us to wait). The main attraction of government debt is that it is less risky. The main attraction of private sector debt and equity is the promise of a higher return. A higher return will only be forthcoming if the borrowers invest the savings in profitable ventures.
        
        The story told by John G. appears to be this: The government creates money from nothing and uses this money to buy goods and services from the private sector, thus leaving the private sector with fewer goods and more money. Then the government “destroys” the money by taxing the private sector, leaving the private sector with fewer goods but also with no more money than it had before the government first created its money from nothing. In other words, the government has expropriated goods and services from the private sector without paying for them. This can only benefit the private sector whose resources have been taken by the government if the government invests the expropriated resources in projects that earn a higher return than the private sector could achieve. Again, empirically, this has not been the case at any point in recent history.
        
        John G.’s story cannot be how the economy works. It is to the economy what gears disengaged are to an engine.
        
        John G on March 05, 2016 · at 4:04 am EST/EDT
        
        ” In other words, the government has expropriated goods and services from the private sector without paying for them. ”
        
        Of course it has paid for them. With government dollars. That’s real income that gets spent and or saved.
        
        “This can only benefit the private sector whose resources have been taken by the government if the government invests the expropriated resources in projects that earn a higher return than the private sector could achieve. ”
        
        Why? The government spends on many things that benefit the public but have no financial ‘returns’.
        
        Spending is a flow.
        
        AEM on March 05, 2016 · at 9:48 am EST/EDT
        
        John G.
        You said that the government creates the money, uses it to buy goods and services from the private sector, and then destroys the money by taxation.
        
        John G on March 06, 2016 · at 2:08 am EST/EDT
        
        It is taxed away as it moves around within the private sector, Ewan.
        
        AEM on March 05, 2016 · at 9:56 am EST/EDT
        
        The government spends on current consumption and on investment. Other than the costs of its own operations, its current consumption is essentially consumption by the private sector and could be managed by the private sector. The argument for government spending on current consumption has to be that it manages it more efficiently. Likewise for investment. So, to spell it out, as you seem to require, the private sector only benefits from foregoing consumption to acquire government financial assets if the government manages the consumption more efficiently and invests at a higher return.
        
        John G on March 05, 2016 · at 7:56 am EST/EDT
        
        “John G.’s story cannot be how the economy works. It is to the economy what gears disengaged are to an engine.”
        
        Perhaps you can enlighten me as to where you think money comes from?
        
        AEM on March 05, 2016 · at 10:18 am EST/EDT
        
        “Money” in the modern economy is a combination of money issued by the central bank, deposits with the banks, and some money market funds. No doubt these days there are other more sophisticated forms that come under the definition of broad money.
        
        You often argue as if the only money is base money and the only financial assets government assets.
        
        John G on March 06, 2016 · at 4:09 am EST/EDT
        
        “Money” in the modern economy is a combination of money issued by the central bank, deposits with the banks, and some money market funds. No doubt these days there are other more sophisticated forms that come under the definition of broad money.
        
        You often argue as if the only money is base money and the only financial assets government assets.”
        
        Yet again, you are avoiding the direct question and pushing a red herring.
        
        I’m not arguing anything of the sort. I’m well aware of the difference between government money and bank credit. It is you who is constantly conflating them to derail the argument.
        
        What sort of poster posts under multiple handles in a thread, Ewan?
        
        AEM on March 06, 2016 · at 9:35 am EST/EDT
        
        John G
        
        ?
        
        You think by saying “Ah-ha! If you disagree with me you must be Mr. X and I don’t defend my contradictions against Mr. X”? Bizarre!
        
        By the way, your conflating bank credit with broad money. Elementary.
        
        Hayek on March 05, 2016 · at 2:57 pm EST/EDT
        
        Sorry for the previous post AEM when I forgot to put my name. Hayek
        What is money ? You never defined it. Does anybody even know what money is ? Is it dollars – debt – bitcoins – barter( you never explained why Goverment treats this as a financial transaction , which according to you only they have the ability to create) or the soon to be cashless digital world .
        
        AEM on March 05, 2016 · at 5:28 pm EST/EDT
        
        Hayek
        I’m torturing the brain cell that retains the last trace of my long-ago reading of an economics textbook. So, sorry if this is wrong. Money is whatever fulfils the function of a unit of measure (to express prices in), a means of exchange (to get round the limitations of barter), and a store of value (until you wish to transact). I don’t know if its a myth, but teachers always like to mention cowrie shells as an example, another is cigarettes. Currently, it’s mainly notes and coins and bank deposits. The government is responsible for creating “base money” and the banks for most of the rest. Any transaction that involves financial assets (like money) can, I suppose, be called a financial transaction. Your other examples are shrewd – what counts as money and the demand for it can change markedly with technology and institutional arrangements (for example, money market fund checking accounts).
        
        Hayek on March 05, 2016 · at 6:46 pm EST/EDT
        
        My question was for John G, AEM. He was the one who posited that only Goverment has the ability to create financial assets- i.e. ” money”. I believe he is wrong and find it ironic that the person who claims the article posted is incoherent is actually proving the authors point through his statist crony capitalist economics. History tells a different story than the one he is trying to feed us
        
        John G on March 05, 2016 · at 8:18 pm EST/EDT
        
        “My question was for John G, AEM. He was the one who posited that only Goverment has the ability to create financial assets- i.e. ” money”.”
        
        The government is the sole source of NET financial assets in its own currency.
        
        All bank credit nets to zero i.e. there is an equal and corresponding debt to the credit created.
        
        Thus the government money accumulated in the system i.e. the combined historical deficit, is the NET financial assets of the non-government.
        
        Maths.
        
        John G on March 04, 2016 · at 9:22 pm EST/EDT
        
        “Tell me John G, which Goverment in history has ever paid off its own debt?”
        
        ‘Paying off government debt’ as you describe it, would be running fiscal surpluses and thus draining savings and income from the private sector.
        
        Do you want less income and savings?
        
        Absent a large current account surplus (like Norway for example) running surpluses (and thus draining money from the private sector) will induce either increased private debt or recession, usually both.
        
        You can’t escape the maths no matter how hard your ideological authority figures try.
        
        Hayek on March 05, 2016 · at 10:42 pm EST/EDT
        
        Ok, i can see you dont want to touch the question of why the IRS treats Barter as a financial transaction, and also why Stress Tests are run on banks if everything Zero’s out .
        
        John G on March 06, 2016 · at 1:48 am EST/EDT
        
        Well, I’m not the IRS clearly. But I imagine that they do so on the general principal that tax drives the demand for the state’s currency and that the widespread avoidance of it would end up with the loss of control.
        
        But you’d have to ask them.
        
        Stress tests are about the solvency of banks. I don’t understand the question in this context. Banks can still go belly up if they make bad loans or they can’t cover their depositors’ funds with enough high powered dollars.
        
        AEM on March 06, 2016 · at 9:59 am EST/EDT
        
        John G
        And above you use one of your favourites – “NET”. This time you use it to condescend to Hayek, mistakenly ignoring the fact that bank deposits act as money and hence have an effect on real activity. Earlier you mistakenly fudge the net effect of government spending and taxation to obscure the fact that your description of money creation, government spending and taxation implies that the government appropriates resources without paying for them – it creates the money, buys the resources with it, and then later taxes the private sector, you say to destroy the money it originally created. NET effect? The government appropriates resources with disappearing money.
        
        You have quite a collection of bizarre ways of evading arguments you can’t answer.
        
        John G on March 06, 2016 · at 4:52 pm EST/EDT
        
        Ewan, you are being deliberately obtuse in your attempt to troll.
        
        Either argue honestly or don’t respond to my posts at all, please.
        
        And do stop with the sock puppetry.
        
        AEM on March 07, 2016 · at 8:23 am EST/EDT
        
        One last time, then.
        
        You said the government creates money from nothing and buys goods and services from the private sector with it.
        
        You said the government claws the money back in tax and destroys it.
        
        You said it, not me.
        
        John G on March 08, 2016 · at 5:38 am EST/EDT
        
        “You said the government creates money from nothing and buys goods and services from the private sector with it.
        
        You said the government claws the money back in tax and destroys it.”
        
        Yes I did. But that doesn’t mean that it hasn’t paid for the resources that it has bought.
        
        If I sell my house to you and you’ve borrowed the money to buy it, you’ve still paid me, even though your paying off your mortgage is destroying money.
        
        I’ve still received the payment and will spend and/or save it.
        
        It’s all a flow, which you appear intellectually unable to process.
        
        Hayek on March 06, 2016 · at 8:40 pm EST/EDT
        
        Obviously you will not answer the question about Barter being taxed as a financial transaction because you understand the implication of the answer. The Goverment did not have any input whatsoever into the transaction( let’s say we are trading vegetable seeds so we can rule out any human invention bar the trading in this scenario). According your assertions the Goverment is the sole provider of financial assets for the purpose of conducting commerce and yet we can see that there is no Goverment invention present in the transaction. How can the Goverment extract something out the transaction ( Taxes-High Powered Money ) when it didn’t exist to begin with and how do we have ” simple balance sheet accounting ” when you are taking something you didn’t create ?
        
        John G on March 07, 2016 · at 6:01 am EST/EDT
        
        “Obviously you will not answer the question about Barter being taxed”
        
        I did answer it.
        
        “According your assertions the Goverment is the sole provider of financial assets”
        
        No. Please read what I’ve said carefully. There is also bank credit i.e. loans. Bank lending creates money too. But not NET financial assets.
        
        “How can the Goverment extract something out the transaction ( Taxes-High Powered Money ) when it didn’t exist to begin with and how do we have ” simple balance sheet accounting ” when you are taking something you didn’t create ?”
        
        No private sector transactions create money. Spending equals income. Profits, wages etc are transfers.
        
        You need to think of it as a system. Macro is not just the sum of all micro as your Austrian School voodoo masters would have you believe.
  - Anonymous on March 04, 2016 · at 12:54 am EST/EDT
    
    I believe you are wrong John G .hHave some commonse-https://mises.org/library/conversation-my-neighbor-sam.
    - Hayek on March 07, 2016 · at 12:55 pm EST/EDT
      
      John, you wrote”Bank lending creates money too” and further on ” No private sector transactions create money” . ??????
      - John G on March 07, 2016 · at 5:47 pm EST/EDT
        
        I took it as read that you would appreciate the difference between commerce/labour and bank lending.
        
        Silly me.
        
        Hayek on March 07, 2016 · at 9:32 pm EST/EDT
        
        Why would I do that. You made statements that you cannot reconcile and put the onus on me to deceipher what you are implying ? If money is different in the two statements then state it.
        
        John G on March 08, 2016 · at 5:42 pm EST/EDT
        
        “Why would I do that. You made statements that you cannot reconcile and put the onus on me to deceipher what you are implying ?”
        
        Because we’d already covered that above.
        
        You present yourself as an expert worthy of condescending to others but you apparently don’t understand the workings of the system even at a superficial level.
        
        Hayek on March 08, 2016 · at 7:33 pm EST/EDT
        
        Expert, I’ll leave that you and the other economic genius who lead us all on the road to worldwide economic collapse . You tell us that central banks can’t go bankrupt in their own currency( they can print money endlessly) and yet this exactly what happened in Russia in 1998 and in doing so gave us the demise of Long Term Capital Management( Of course, who picked up the tab for these fellow masters of the universe with their Nobel prizes in economics- us of course,the poor sucker taxpayers) . So yes, you are wrong. You say central banks don’t have equity issues and yet the Central bank of China holds equity the Danish central bank purchase equity, the Swiss national bank purchase equity and many more. Wrong again. I understand that you know how the plumbing works and you probably paid a big wad of cash to learn this , but until you can explain how my water bill makes sense I’ll stick to “Central Banking for Dummies” and figure out the rest trying to use a bit of common sense like my grandmother told me to .
        
        John G on March 09, 2016 · at 5:37 pm EST/EDT
        
        “yet this exactly what happened in Russia in 1998”
        
        No it isn’t.
        
        The issuer of a currency can not be insolvent in that currency.
        
        It is a self evident fact.
        
        You need to absorb and process that fact if you are to progress your macroeconomic understanding.
        
        Macro can seem counterintuitive when you’ve been conditioned to believe that governments are like households and money is a finite commodity.
        
        The hardest part for most people is in the unlearning of the bunkum you’ve been taught all your life and reinforced by mainstream economists who work for the masters of the universe. What you’ve been taught plays into their hands.
        
        You’re opposing me for some very wrong reasons. I’m not carrying anyone’s water here. Especially bankers and central bankers.
        
        Hayek on March 10, 2016 · at 12:59 pm EST/EDT
        
        Yes, I used the wrong terms. It should have been default not bankruptcy and insolvency is not a issue when the printing press can be run to infinity ala Zimbabwe. Be as it may, most people understand the implications of a out of control printing press and they understand who picks up the bill for the devaluation of their wealth. People in ivory towers may use legalese such as default but to the man on the street the term is bankrupt, somebody is not going to get paid and somebody is out- in the context of this article that is the taxpayer and legalese is just that . Goverment by its nature is Socialist and out of control debt will eventually lead to a bankrupt state and eventually war. Soveriegn debt is the catalyst for war. I have learned some things here. Thanks , have a good day. Hayek
        
        John G on March 11, 2016 · at 6:51 am EST/EDT
        
        Hayek on March 10, 2016 · at 12:59 pm UTC
        
        That’s just a load of drivel. You have no idea of what you’re talking about.
        
        Currency issuers don’t default in their own currency either. Why would they?
        
        Your mind is being controlled by the big business masters of the universe that you think you’re railing against.
        
        The ‘libertarian’ movement and its Austrian School pretend economics has always been funded and promoted by oligarchs.
        
        They don’t want any social spending, they want unemployment and they want you to be beholden to the banks.
        
        So they fill your little heads full of scare stories about inflation and the evils of ‘printing money’. But their stories are easily debunked fabrications.
        
        John G on March 10, 2016 · at 5:47 am EST/EDT
        
        Oh and I paid nothing to go to university and I was taught all the neoclassical mainstream rubbish that is still clouding your thinking.
        
        Hayek on March 11, 2016 · at 12:48 pm EST/EDT
        
        Aside from your fixation on ” The Austrian School ” , you didn’t read what I wrote. I didn’t mention inflation, I said devaluation of wealth. I acknowledged that money creation can continue ad infininum. After all that is why Zimbabwe and Venezuela are booming right now
        
        Anonymous on March 11, 2016 · at 7:23 pm EST/EDT
        
        Zimbabwe for hyperventilators 101
        
        http://bilbo.economicoutlook.net/blog/?p=3773
- Rick on March 03, 2016 · at 9:34 am EST/EDT
  
  You should go read John Maynard Keynes too. Elementary macroeconomics.
  - Weston on March 03, 2016 · at 12:26 pm EST/EDT
    
    Keyenes as elmentary macro? Folks, you are really misinformed or just plained uneducated. Keyenes was a puppet of British empire, Rothschilds and all moneychangers, his main role was to build a theory (any theory!) that would excuse state and corporations meddling in the private sector, destroying capital and creating monopolies.
    
    I really wonder how many confused people are, but no wonder as the education was hijacked by moneychangers as were the media and politics. Sad state of affairs, and this is a global phenomenon.
Andy tonti on March 03, 2016 · at 1:51 am EST/EDT

Best explanation of capitalism I’ve ever read. I now have a much clearer understanding of our economic system, and can now explain it to friends and associates. But the 2-solution scenario you explain can be very dangerous and frightening to our world. And with the possible election of Hillary Clinton to the White House, this becomes disturbing. Thanks for your greatly helpful assessment, Cathal.
- Anonymous on March 03, 2016 · at 6:24 am EST/EDT
  
  Andy,
  You’re welcome. Enjoy the free pdf: http://beforethecollapse.com/2015/11/12/a-free-pdf/
  Cathal
Jack's Raging Bile Duct on March 03, 2016 · at 5:21 am EST/EDT

So…destruction of capital, both in its raw monetary form via fiat and inflation, as well as destruction of actual goods via war…is Capitalism. That’s like calling a thief who eats stolen bread a baker.

Perhaps what we are looking at instead is the logical conclusion of central planning, market interference, and debt-as-money. That doesn’t sound very provocative though. Let’s abuse language instead!
wootendw on March 03, 2016 · at 7:17 am EST/EDT

The US has not been a free market capitalist country since the creation of the Federal Reserve in 1913. Once there is a central bank, there is no longer a free market – if there ever was. A true, free market exists when there is individual liberty with private property rights. There is no unemployment in free market economy because there is no minimum wage and no barrier to starting a business – only a police force and judicial system with limited powers to protect people’s freedom and property. The ‘capitalists’ in US politics today are the libertarians – the ones most opposed to sticking the US government’s nose into Ukraine and Syria.
- John G on March 03, 2016 · at 7:30 am EST/EDT
  
  “There is no unemployment in free market economy because there is no minimum wage and no barrier to starting a business”
  
  It’s truly scary that people can believe that.
  - Anonymous on March 03, 2016 · at 3:15 pm EST/EDT
    
    It is truly scary that so many people believe that their government should use its power of force to prevent a would-be employee from selling his services to an employer at a compensation mutually agreeable to both.
    
    And it is truly scary that so many people believe that individuals should not be able to start a business (i.e., earn a living) without permission from government.
    - John G on March 04, 2016 · at 5:39 am EST/EDT
      
      Not much business is done when no one has any money to buy stuff with because wages are low.
Ed on March 03, 2016 · at 8:57 am EST/EDT

The key idea in this article is the idea of Net fossil energy. Capitalism has severe problems when Net fossil energy begins to fall.

By the end of this Century, the World will have no fossil fuels left which can be extracted at an energy profit. Lets be clear, there will be plenty of fossil fuels left in the ground but the extraction process will require more energy than they give back, so much of the fossil fuel will remain in the ground.

There are many ways that that the Human Race can transition from a fossil fuelled industrial civilisation to a wood burning one. World War is the most probable.
- Hayek on March 03, 2016 · at 1:29 pm EST/EDT
  
  You are assuming many things there Ed and passing them off as a given fact. Remember , we were supposed to be out of fossil fuels ( if that is a true statement- Abiotic Theory-) now. Obviously we haven’t. As the saying goes- Don’t try to make a living forecasting- especially the future .
Lord Effington Three Sticks on March 03, 2016 · at 10:02 am EST/EDT

“correctly predicted” 2008 crisis because communists are ALWAYS predict the downfall of capitalism. Perhaps that’s not so useful since you predicted it in every other year too!
The one who knows on March 03, 2016 · at 10:55 am EST/EDT

Capitalism is something that replaced feudalism and enabled people to be lifted out of poverty and accumulate wealth. With that being said it only works with free market being there – right now what we see is Crony Capitalism (or oligarcho-capitalism) so the centralised power taxing everyone and making top-down decisions economically, militarily etc etc. We can see that in today’s battlefields:
Too many players want to see oil price higher – also with shale being eliminated and maybe war breaking up with more than just Syrians dying the price has to eventually go up and Iran with their reserves cannot balance the market to ‘new lows’ we see now. http://independenttrader.org/will-oil-price-stop-falling.html
Situation in Syria is trickling down to ‘wannabe superpowers’ like Turkey – But it will be big boys fighting USA and mother Russia. They might find themselves helping each other out against China! Check this analysis independenttrader.org/us-vs-china-the-escalation-of-the-conflict.html

Seeing what is happening in Yemen it strikes me that noone was talking about that! I found one guy saying that militarisation on Saudi-Yemeni border and it’s ins and outs to answer ‘why’ – http://independenttrader.org/the-most-important-events-of-january-2016.html
Cu Chulainn on March 03, 2016 · at 12:59 pm EST/EDT

This account “manages to avoid the fundamental point, which is that only labour power returns more than its replacement cost.”

https://niqnaq.wordpress.com/2015/12/02/did-i-ever-explain-the-relationship-between-the-world-wars-and-the-falling-rate-of-profit-yes-you-did/#comment-98152
Anonymous on March 03, 2016 · at 1:00 pm EST/EDT

A very interesting article. I have been thinking myself about this cyclicity. However, I wonder why the author did not include the “first” cycle in his table: 1900s – high banker pay, 1907s – a worldwide crisis, 1914 – a world war.

I read some economic articles published shortly after 1907. The 1907 crisis was described as a “world crisis”. The articles can be accessed for free online in “econometrica”.
MSimon on March 03, 2016 · at 2:00 pm EST/EDT

You are mistaking the bottom of a Kondratieff Cycle wit the end of capitalism. It is not the first time this delusion has surfaced. It was also popular post 1929.

What is going on is classic INs vs OUTs. Which always happens at the end of a cycle. The INs try to maintain their income by politics.

Just one example – cannabinoid medicine fully exploited could reduce medical expenditure by 25% to 75%. You think all the pharma companies and hospitals are going to favor that? Johnson & Johnson is the biggest contributor to “Drug Free America”.
Anonymous on March 03, 2016 · at 2:40 pm EST/EDT

Came here to rebuke the author for his poor understanding of capitalism and lack of clarity in his definitions. Found that others have already taken care of it. Well done.
flek on March 03, 2016 · at 3:21 pm EST/EDT

Blame the .ism and not the tribe. How convenient.
Pull back the curtain, there’s always a ‘jew’.

Like the current migrant ‘crisis’ which is planned soft white genocide to race-mix whites out of existence.

Like the ones directly behind the gun control efforts in america

Like the ones tricking the sunni and shia into annihilating each other via the whabbi middlemen
to extend ‘greater israel’ with help from isis/mossad/cia/ghcq.

Like the ones attempting to get russia/china/us into a world war.

Like the ones who initiated the ukraine coup to reignite the khazar homeland.

And like the ones in the past responsible for: bolshevik revolution, demonization of germany, mao in china, uss liberty, 1986 libyan bombing, federal reserve/ecb/bis ponzi, and on and on and on.

-flek
- Anonymous on March 03, 2016 · at 5:12 pm EST/EDT
  
  Humans would be a shorter explanation
- AEM on March 03, 2016 · at 10:14 pm EST/EDT
  
  The Saker draws the line at racism (and block capitals), but this stuff always gets through – because, as the Saker has explained, racists are not free to express their opinions here, but Jew haters are! For the life of me …
  - flek on March 04, 2016 · at 9:11 am EST/EDT
    
    That’s because ‘jews’ aren’t a race.
    Why, because anyone can ‘convert’ and join the tribe.
    
    Resurrected phariseeism by khazar swindlers does not make one a
    true hebrew.
    
    Ashkenazi ‘jews’ on rothschild stolen land are certainly racist.
    
    -flek
    - AEM on March 04, 2016 · at 9:59 am EST/EDT
      
      No, you may have reason to criticise individuals who are Jews or groups who exploit Judaism or the historical persecution of the Jews (like Zionists). That is not what you express here, which has every appearance of irrational hatred.
      
      I have read the Saker’s explanation for banning racism but allowing Jew hatred and homophobia (neither of which he espouses despite some bizarre comments). He is mistaken, I think. He should reconsider. There is a difference between on the one hand allowing reasonable criticism of Israel, Zionism, AIPAC etc., or reasoned argument for discrimination against one section of the community (even if those arguments are shown to be fallacious or to have worrying implications) – and on the other hand allowing mouth-frothing hatred. Again, I have read the Saker’s explanation for allowing Jew haters freedom of speech. He has not, I think, managed to explain why they should have that freedom on his blog.
      - flek on March 04, 2016 · at 1:35 pm EST/EDT
        
        I haven’t said anything about hate.
        Nothing.
        I’ve only listed what they do.
        Stop trying to muddy the waters. The ‘jews’
        are bound by the babylonian talmud.
        
        You’re behaving like an irrational hasbara troll
        by attacking the messenger instead of refuting anything stated.
        
        Have a good day ;)
        
        -flek
        
        AEM on March 05, 2016 · at 9:43 am EST/EDT
        
        Moderator
        Am I at least allowed to say:
        
        – there is nothing here worth refuting
        
        – one doesn’t need to talk about hatred to express it
        
        – beliefs arrived at without the use of reason can’t be called rational, so there is a certain irony in this feck accusing me of irrationality.
        
        AEM on March 05, 2016 · at 9:50 am EST/EDT
        
        Sorry! It’s flek.
william beeby on March 03, 2016 · at 7:41 pm EST/EDT

Marx makes very little reference to the influence of international central banking and control of the money supply in relation to capitalism and it`s workings. He concentrates virtually all of his study of capital on the relationship between owners and workers , the exploiters and the exploited so to speak. It is the financiers who provide the capitalists with money to invest in using labour much more so these days than in the mid 19th century when Marx was writing his theories when more money or capital to invest was owned by private individuals . I have read that this was because Marx was actually sponsored by the Rothschild bankers ( some say he was related distantly to them ) and so did not want to bring attention to their role in the running of the financial system. All fiat currencies eventually die and the clock is reset using gold and silver as a rule and then the game begins again and of course the same mistakes will not be made again but people forget and we get the same way out of the mess, world wars or elongated regional wars , yet again.
Wasn`t Karl Marx of the opinion that socialism and then communism would bring an end to wars? You know workers of the world unite and all that . As we are now on the precipice of another world war instead of trying to define capitalism should we not be looking for ways to do as Marx suggested , unite to prevent the end of civilisation as we know it ? No I don`t mean we should turn to communism I am serious about us , the ordinary people , joining together and speaking out from the roof tops that we don`t want this economic cycle to end in world war and do all ” we ” can to prevent it ?
william beeby on March 03, 2016 · at 7:43 pm EST/EDT

By the way Cathal I enjoyed reading your piece very much so thank you and look at the very good response you got. Keep it up .
Ernie Bauer on March 04, 2016 · at 12:33 am EST/EDT

Only us, we the people, can stop the next step 1939/2016. Hopefully the dormant mass, the low IQ’d members of the society will wake up and realize that the “morloks” (from “The Time Machine” movie) can be defeated.
Fat Lotus Eater on March 05, 2016 · at 1:36 pm EST/EDT

I agree with some parts in this analysis, however it needs more in it to describe the complexity of the situation. Marxist analysis is always a useful tool, but sometimes it lucks clarity due to ideological blindness and a single orthodox way to interpret things. So it has limits and should be used with caution.

The main thing I missed in this text is the answer to the big question: “Good, we have robots or slaves replacing labor all over the world, on our way to becoming gods. But, wait! Who is going to buy our products now?”

The answer is no one, or at least, not many. That is why Capitalism has turned cyber. It replaced production with finance. Finance is now the dominant sector of capital production. In which in turn, people in this sector are also being replaced by robots (server farms) and algorithms (high frequency transactions). As a result, profit will now gradually become the privilege of the very few ultra-rich elites, some vulture funds and the banks. An autistic money machine, creating capital out of thin air. The crucial productive part of capitalism is being phased out (due to demand destruction) and the industrial production and revolution will become limited to governments and the ultra-rich only. The rest of us, can return to the 12th Century. Thank you very much for your service. Your sacrifice will not be forgotten by your elites.

Furthermore, what I also miss in this discussion, is deflation. Everybody mentions hyperinflation as the next big thing or as a marker of things to come, but the real issue is deflation. Not as in the decline in prices, but as the destruction of the money supply and money circulation. No money in the pocket (due to deflation) means the same as worthless money (due to hyperinflation). In both cases, you can’t buy food, shelter and clothing, so you’re ****ed either way. But, in reality, the clear and present danger is a deflationary collapse all over.

Also, we should mention that the ZIRP and now NIRP policies, as well as uncontrolled and unregulated debt creation (see derivatives), austerity policies, the collapse in oil prices and China imploding, capital controls and war on cash, are all important markers that the present system is actually collapsing. Not just another glorious boom/bust cycle for Capitalism, but its terminal collapse. Contrary to popular belief, Capitalism isn’t a primordial system predating the sun. Its only 400 years old and its now dying of colon cancer.

Capitalism and Liberalism (its ideological base) are going over the same cliff as its defeated enemy Communism did, some 27 years ago. Why? Firstly, no one mentions the real cost of raw materials and no one calculates them in their equations. Oil and iron in our free market minds were free to grab and sell, without any thoughts of consequences. Well guess what. The oil and raw materials businesses are becoming economically non-viable, fast, while R&D investment is coming to a complete stop. The hubris that this system can go on forever creating bigger and better asset bubbles (with zero risk and minimal input for the investor) is leading to its ruin. You need exotic materials to create iPhones, traffic lights, Teslas, VR Goggles, power banks, wind turbines, hover boards and server farms. Lacking a revolutionary zero point energy solution, you need oil to produce them and distribute them. Thus, when there is not much to no profit in it, the whole of the economy collapses. No more asset bubbles possible = no more Mr. Monopoly. Simple.

Even more, the debt bubble is so big it consumes the whole planet. 1.4 quadrillion dollars worth of debt(!!!), mostly in the form of derivatives (CDSs, CDOs etc), with 200 trillion of them in the red, ready to bust anytime now. The very notions of money and economy are undermined by these figures. It is a debt that cannot ever be repaid. With oil and raw materials prices collapsing and China in free fall, this is game over for the present system. Sorry.

So war is coming either way, not because Capitalism wills it, but due to the fact that the deck is being reshuffled. As Heraclitus called it, “war is the father of everything”. However, it is more likely that these next wars are going to be localized, semi-hybrid, proxy, brutal civil wars and not full scale thermo-nuclear, WW3 Nuclear Winter type ones.
Any Mouse on March 05, 2016 · at 1:53 pm EST/EDT

This article shows analytical tools are imperative for understanding the information one digests.

Sun Tzu, The Art of War, chapter II, Waging War:

‘6. There is no instance of a country having benefited from prolonged warfare.

7. It is only one who is thoroughly acquainted with the evils of war that can thoroughly understand the profitable way of carrying it on.

[That is, with rapidity. Only one who knows the disastrous effects of a long war can realize the supreme importance of rapidity in bringing it to a close. Only two commentators seem to favor this interpretation, but it fits well into the logic of the context, whereas the rendering, “He who does not know the evils of war cannot appreciate its benefits,” is distinctly pointless.]

Both above interpretations by the translator/author Lionel Giles are obviously wrong, for otherwise the GWBush administration would not embark on what they called “The Long War”, and, with another name, “The 70 Year War”.

If the elites amass unsolvable debts in countries,
If the elites continue inflating the house bubble with QE,
If the elites bomb Iraqis, Syrians, Libyans so they flee en mass to Europe,
If Goldman Sachs sets up Greece’s crisis (as shown by Greg Pallast in Vultures’ Picnic),
If the elites create as many crises they can,

….then that is what the elites want – as shown by Sun Tzu in point 7, for crisis = war.
Ewan on March 06, 2016 · at 6:20 pm EST/EDT

It’s a bit late in the proceedings to be repeating the point, but it’s still worthwhile, I think, not because my thoughts are of any special interest (they’re not), but because the subject is important and those who are competent should be debating it and educating us:

How do the likes of Russia escape the economic stranglehold of the US?

Political economy is inevitably, well, political. Ideology may be well hidden, but is always fundamental. This applies to the current dogma, but also to its rivals, and this, I think, needs to be considered explicitly.

Various proposals for escaping the US have been suggested here.

It’s a given that the three “neo”s are anathema (neoliberal economics – new classical/new Keynesian – as a weapon of neocon neo-imperialism)

The trouble is that this seems to persuade a majority of commentators that the solution is to reject all mainstream economics and to rely on the wisdom of central government – which reliance assumes that the government knows and will follow the “correct” theory of how the economy works, and that the “correct” theory is some eclectic form of post-post-Keynesianism.

Just what this theory entails, I find hard to get in focus. The clearest version is from Michael Hudson (I tried to point out where it seems plain wrong). A less coherent version is from Glaziev (I tried likewise). The lamest comes from commentators who share Michael Hudson’s penchant for New Money Theory, but lack his rhetorical skills to hide its flaws.

Proponents of the Austrian School get short shrift here, although surely history tells us that they are right to be suspicious of central government.

The likes of me get equally short shrift for traditional British monetary theory, despite the fact that it correctly explains the workings of the monetary economy (although clearly inadequate as a solution to the problem as a whole).

These, and aspects of mainstream economics, should not be dismissed quite so readily. There is no point escaping the US simply to fall into the trap of incompetence – low productivity, a business cycle more volatile than real variables dictate, chronic poverty – just because competence requires the humility to learn from those you disagree with.

This is not my point, however. Political economy is, as I said so insightfully, political. All the alternatives offered here (including by me) rely on some form of capitalism, whether state or market. None (I would argue) adequately addresses the underlying ideological question of exploitation. They merely argue over who should do the exploiting, capitalists or the state “on behalf of the people”.

The only theory that I know of that tries to address the fact that there is an ideology fundamental to any economy is Marxian economics, which understandably also gets short shrift here (given the history of “Marxism-Leninism” in Russia and China).

I’ve asked before if anyone has any references on Marxian economics or thoughts on its relevance to the problem facing those trying to extricate themselves from turbo-charged neoliberalism and its evils.

I’ve found a couple of references, but again my point is that this is something that should be actively debated.

It is not enough simply to repeat again and again, with more or less righteous indignation, the mantras of Modern Money Theory and dismiss alternatives out of hand. The problem is too important for this to be a sensible strategy for formulating a practical solution.
- Hayek on March 06, 2016 · at 8:54 pm EST/EDT
  
  I believe your statement that the US suffers from chronic poverty to be completely wrong. If we hypothetically say chronic poverty on a scale of 1-10 rates as 8+ where do Africa and other improvised continents rate. Poverty is as much a state of mind as it is a living standard
  - Ewan on March 06, 2016 · at 10:09 pm EST/EDT
    
    Luckily for me, I didn’t make the statement. That you think I did is, alas, a comment on my prose style.
    - Hayek on March 07, 2016 · at 1:20 am EST/EDT
      
      I stand corrected, I see that I misread your post- Sorry
- John G on March 07, 2016 · at 7:39 am EST/EDT
  
  “The likes of me get equally short shrift for traditional British monetary theory, despite the fact that it correctly explains the workings of the monetary economy (although clearly inadequate as a solution to the problem as a whole).”
  
  There is no such thing as “traditional British monetary theory”. You are a bog standard neoclassical and you aren’t correctly explaining anything because your theories and precepts are 45 years out of date. Your education hasn’t even informed you as to the Cambridge school of thought.
  
  That’s what happens when you do a PPE course and think you’ve got a grounding in economics. You’re just taught standard Chicago School bollocks as if it was settled science. It isn’t. It’s a failure.
  
  You’re trolling Ewan/AEM/Ali and whatever other sock puppets you’re using.
  - Ewan on March 07, 2016 · at 9:03 am EST/EDT
    
    No, I have to protest at this silliness. There’s two centuries of the British tradition. Go and read Thornton. Trolling forsooth!
    - John G on March 07, 2016 · at 4:58 pm EST/EDT
      
      “There’s two centuries of the British tradition.”
      
      Absurd. Keynes for one overturned classical economics just 80 years ago.
      
      What about Wynne Godley and many others more recently?
      
      You could do with a bit of Godley actually. Teach you a bit of stock/flow consistent thinking.
    - John G on March 08, 2016 · at 8:13 am EST/EDT
      
      The great Polish economist, Michał Kalecki (in his 1943 article – Political Aspects of Full Employment – Page 348) wrote that:
      
      It may be asked where the public will get the money to lend to the government if they do not curtail their investment and consumption. To understand this process it is best, I think, to imagine for a moment that the government pays its suppliers in government securities. The suppliers will, in general, not retain these securities but put them into circulation while buying other goods and services, and so on, until finally these securities will reach persons or firms which retain them as interest-yielding assets. In any period of time the total increase in government securities in the possession (transitory or final) of persons and firms will be equal to the goods and services sold to the government. Thus what the economy lends to the government are goods and services whose production is ‘financed’ by government securities. In reality the government pays for the services, not in securities, but in cash, but it simultaneously issues securities and so drains the cash off; and this is equivalent to the imaginary process described above.
      - Hayek on March 08, 2016 · at 1:44 pm EST/EDT
        
        And there are your true colours. Surprise Surprise
        
        John G on March 09, 2016 · at 6:13 am EST/EDT
        
        I’ve no idea of what you mean.
        
        Try speaking in plain English for a change. Lose the Austrian newspeak.
  - Hayek on March 07, 2016 · at 1:13 pm EST/EDT
    
    Call it whatever you want, makes no difference to me, theory is theory. What isn’t theory is that my taxes keep going up , my standard of living is going down and masters of the universe like yourself tell me to -relax-no worries -everything adds up. Now that’s the real bollocks in this conversation.
    - John G on March 07, 2016 · at 4:51 pm EST/EDT
      
      I’m not a master of the universe. I don’t believe there should be privately owned banks. Or at the very least severely contained and constrained private banks.
      
      Nor am I telling you that everything is fine. The problem is neoliberalism and poor economic understanding of the political class, the media and the general public.
      
      If you wish to change the system, you’d better learn how it actually works first.
      - Hayek on March 08, 2016 · at 12:40 am EST/EDT
        
        Your like the plumber who tells me how the plumbing system works in my house- water pressure, valves , water flows , drainage etc but you are clueless when it comes to explaining my water bill . You can’t explain the charges , why I am paying for more than I use and why I have surcharge after surcharge and why the bill keeps going up even though I’m actually using less water. Thanks
        
        John G on March 08, 2016 · at 5:32 am EST/EDT
        
        Well one of us is clueless.
Catfish on May 24, 2016 · at 6:37 pm EST/EDT

What we have in the us is not capitalism but fascism and it’s been that way since before ww2 but has been growing more complete since then. Under capitalism corporations are not above the law, like they are in the us, and the government doesn’t go giving away taxpayer money to bail out failing corporations. Fascism by Mussolini’s definition is synonymous with corporatism. It when government and corporations work in each other’s interests with little regard to how it affects the people the government claims to represent. Examples are the privately owned fed reserve, goldman sachs, and a number of others that it is government policy to support even though it’s harmful to the nation and most of its people.
Malcolm Reynolds on January 06, 2017 · at 1:51 pm EST/EDT

“given the calibre of their nuclear arsenal, how can they be fought let alone defeated”

Umm, what? The Chinese steal or buy their most advanced military systems and that includes nukes (Los Alamos) and the necessary satellite tech to deliver them (Bill Clinton). And they don’t possess anywhere near the numbers.

So you must be referring to Russia. While they are updating them, yeah, not hardly.

http://www.businessinsider.com/us-vs-russia-nuclear-weapons-2016-9
Heartless on February 12, 2017 · at 2:29 pm EST/EDT

to modify your essay a bit….
The first motivation of any rational member of society is power. Power is vastly more important than money. ‘If you’re rich and weak you get robbed’. If you’re poor and strong your power is limited in scope but does allow some transitory and temporary safety from those richer by the perception that there are easier sources to increase their money or power than you. If you’re poor and weak you are a slave. If you’re rich and strong you rule and possess some percentage of total available power and money. Power can produce more strength by investment in both safety and acquisition; thus, money properly allocated will always yield more power and money. The goal of power is to accrue ever more power with the least amount of investment necessary to do so. Thus both power and money are increased by good investment strategy. The ultimate goal by those who have gained some power is a total consolidation of power into the hands of an ever-declining number of holders of power. The final peak of power would therefore be when only one person held all power and all money. True wisdom is never allow one’s self to remain stagnant in the increase of power; rather, to always seek more.