No Way to Run an Economy?

Submitted by Leo Kolivakis, publisher of Pension Pulse.

I recently read Graham Turner's book, No Way to Run an Economy: Why the System Failed and How to Put it Right.
Quite honestly, it is the best book I've read in finance/ economics and
politics in years and I highly recommend it to money managers, central
bankers, policymakers, and anyone else who wants to understand the
financial crisis and its repercussions for our future.

Graham Turner is one of the best economists I ever met. His firm, GFC Economics, is based in London and it provides independent economic
research - on US, UK, Japan, and Eurozone – to institutional clients on
a subscription basis. If you're an institutional money manager or government agency, this
one service worth spending on. There are others but they're way more
expensive and do not offer the insight that Graham and his team offer.

Ruth Sutherland, business editor of the Observer recently reviewed Graham's new book for the New Statesman:

Democratic deficit

The
most astute commentators on the credit crunch tend not to be part of
the mainstream, Anglo-American, free-market consensus. For example, the
economist Nouriel Roubini, widely credited with predicting the crisis,
was born in Iran to Jewish parents; the hedge-fund manager and
philosopher George Soros was living in Budapest when the Nazis invaded
Hungary. Meanwhile, the Financial Times journalist Gillian Tett brings
an academic background in social anthropology to bear on her
observation of bankers, as well as the experience of living and working
in Japan during its long battle to extricate itself from a deflationary
slump.

Graham Turner is also one of
the outsiders. In his view, the Japanese experience offers a
frightening glimpse into our future, with deflation, where the prices
of assets such as houses and shares are locked into a downward spiral,
becoming entrenched. If that happens, conventional policy measures,
such as reducing interest rates and pushing through huge increases in
government spending, can fail, as indeed they have in Japan.

We
are not quite there yet, but how did we end up in the state we are in?
Rather than dwell on the complexities of derivative debt instruments,
Turner examines the way in which globalisation has worked to the
benefit of capital and the detriment of labour, identifying it as one
of the prime causes of the crisis. As companies roamed the globe in
search of cheaper workers, policymakers paid far too little heed to
stagnant or falling wages. The median wage in the US was no higher in
2008 than it had been eight years previously, and the situation in the
UK was little better.

With the
failure of governments to recognise the imbalance of capital and labour
as being at the heart of the collapse, policymakers were too slow to
come to the rescue of homebuyers in the US and the UK with
interest-rate cuts and bank bailouts.

Locked in
their ivory towers, and lobbied to perdition by the PR machines of Wall
Street and the City, they were oblivious to the plight of ordinary
people. Turner argues that when capitalists cast around for ways to put
excess capital to work, funds are driven into speculative or fictitious
ventures. And we saw that pretty clearly in the boom, with its highly
leveraged private equity deals and its questionable mergers and
takeovers.

Turner's view that the capitalist system, rather than
greedy or foolish individuals, is to blame, puts him in improbable
agreement with Sir Fred Goodwin, the former chief executive of the
Royal Bank of Scotland. Sir Fred told the Treasury select committee of
MPs: "If you want to blame it all on me and close the book, that will
get the job done very quickly, but it does not go anywhere near close
to the cause of all this." Goodwin was talking about the sudden drying
up of liquidity, rather than the underlying contradictions within
capitalism. But Turner agrees that Goodwin, however reprehensible his
conduct, is not the bogeyman and was right to blame the system.

The
promise in the subtitle of Turner's book - that he will tell us how to
put things right - is hard to fulfil. With interest rates close to zero
in the UK and the US, the options available to governments are limited.

In
Turner's view, Barack Obama could embark on more quantitative easing
and should nationalise the banks wholesale, at least temporarily, so
that they can be compelled to get credit flowing back through the
economy, instead of trying, in clandestine fashion, to rebuild their
own balance sheets.

Many orthodox economists would
regard such prescriptions as extreme and dangerous, but Turner is
surely right to point to a democratic deficit that leaves us powerless
to hold banks and large multinational companies to account.

As
employees, and as owners through our pension funds, we should all have
a say in how big businesses are run. We do not, because workers are
denied representation, and because the large investors to whom we
delegate most of our voting power fail to take their respon­sibility as
owners of companies sufficiently seriously. Turner argues that we
urgently need a thorough rethink of the shareholder model that blindly
chases short-term profit and denies a voice to workers - and, indeed,
to small investors. And you don't have to be a Marxist to think he has
a point.

Indeed, Graham has repeatedly stated that workers need "a greater voice" in banking:

Can governments combat the world recession with a selection of policy tweaks?

Financial
forecaster Graham Turner believes real recovery can only be achieved by
savagely attacking the system itself, reducing the vice-like grip of
shareholders on the steering wheel of global firms.

Mr
Turner, who worked for several Japanese banks in the '90s before
founding Mile End-based GFC Economics in 1999, believes that "more
effective participation of workers" is key to restoring balance in the
world economy.

He believes governments should have taken
advantage of the nationalisation of the banks by breaking up the
shareholder-oriented model and imposing a "worker veto".

He
said: "It was an opportunity missed really to change the perception
that people can't have a say in the way that the economy is run.

"It's
about exerting sufficient oversight, not just through government but by
giving the people a greater voice. Increased regulation just gives the
banking lobby something to aim at.

"What you need is an
effective counterweight within the workforce so decisions, such as
where to place a factory, are not based exclusively on how they benefit
the shareholders.

"I don't believe increased regulation deals
with that. It can be bent, distorted and undermined by corporate power.
We need more effective participation of the workers within the
decision-making structure of companies to create a more effective
balance."

Mr Turner recommended aggressive measures such as
quantitative easing to combat the financial slide in his 2008 book, The
Credit Crunch.

Talking to The Wharf following the release of
his second book, entitled No Way To Run An Economy, he re-states this
as one of the two main pillars of his strategy to haul the world out of
the downturn.

He said: "I would have taken a twin approach. I
would have introduced more aggressive quantitative easing from a much
earlier stage, and I would have made a more direct intervention into
the private sector.

"The one thing that could mitigate this
current bubble is aggressive quantitative easing because that's what
was used in the '30s.

"By 1932 they started aggressive
quantitative easing and they put a floor in the economy. By comparison
to what we have now it was a swifter recovery.

"Governments haven't really been committed to quantitative easing in the manner that we saw in the '30s."

Mr
Turner is convinced that the US remains the "epicentre" of the crisis,
and criticises the Obama administration for its slow reaction.

He
said: "[Obama is] trying to do too much and he's out of his depth. He's
trying to fix healthcare, climate change, the wars in Iraq and
Afghanistan and the housing problem.

"The
world economy will rise or fall based on how the US fares in the next
12 months. I believe the US gave Obama a mandate with his landslide
election victory and he hasn't used that mandate to be radical.

"The
GDP numbers don't do justice to the problems in the States. All the
data says repossessions are accelerating, despite the money that's
being thrown at banks and the incentives that are in place. It's the
mortgage problems that caused the crisis, and they're spreading to
commercial property as well.

"One in four mortgages is behind
in Florida and the foreclosure crisis is spreading away form the
traditional sub-prime areas into states such as New Jersey, Utah, Idaho
and Rhode Island. Banks are either unwilling or unable to put the
people who are in arrears on a more sustainable mortgage scheme.

"Banks
are not charities and they're throwing people out of their homes in
record numbers. Every time someone forecloses it depresses prices in
that entire neighbourhood significantly.

"The
banking lobby have been very strong. It's a perfectly legitimate point
to make that the Obama administration is too close to Wall Street.

"The
Bush administration were very close as well, but the new administration
has not distanced itself anywhere near as far as it should have done.
Too much money has gone in without getting the result that was promised.

"There's a systematic breakdown that can't be addressed by monetary and fiscal policy anymore."

Mr
Turner also highlights climate change as a sign of how globalisation
has damaged the environment and communities, but believes it has been
unfairly "marginalised and radicalised" as an economic issue.

He said: "It goes to the heart of the way we structure the economy.

"Burberry
shut down its factories in Wales and Rotherham and now make their goods
in Turkey and China and bring them back into this country with a mark
up.

"It's destructive for the environment and communities in
this country. But capitalism can't deal with climate change because of
competition pressures. If your rival ships to China so it can undercut
you, you don't have a choice but to do the same under the shareholder
model. If companies had a worker veto, they could break this vicious
cycle."

While many commentators see
the recession as the result of greed, Mr Turner believes that much of
the debt was created through need rather than luxury.

He said:
"We had a boom and it was still a struggle for people. Debt was a
substitute for decent income gains. For many people the cost of buying
a home and doing basic things in life was an uphill battle and debt
became the way to achieve things.

"There's an critique of debt
now, in which everyone got greedy and we all need to pay. It's rubbish.
The Bank of England showed the people with the biggest debt problem
were the poorest people and they're the ones getting most shafted by
the credit crunch.

"The squeeze in public spending being
discussed is going to exacerbate the current divide. That's what
globalisation has done. It's failed the west, and probably the emerging
markets too.

"Corporate power is hollowing out industry and has
been doing so since the 1980s. We now work in bubble jobs sustained by
taking on increasing amounts of debt. There's a ridiculous logic to
capitalism and it's been exposed by all this, not that anyone would
admit it."

Graham recently commented on Socialist Worker online, writing on why Britain's recession is a long way from over:

“Unbelievable,
literally”. That was the response of one economist at US investment
bank Goldman Sachs to the news last month that Britain was still in
recession.

The Office for National Statistics (ONS) had just
announced a 0.4 percent decline in real GDP – the sixth quarter in a
row that the economy has shrunk.

According to the ONS, the
economy had declined 6 percent from its peak. But economists at Goldman
Sachs were unconvinced. Business surveys pointed to a much stronger
economy, they claimed. The official data were “hardly worth the paper
they were printed on”.

Yet a month later Britain is still in
recession. Last week’s figures show a decline of 0.3 percent. This
recession is proving all too stubborn – and a closer inspection of the
data shows why.

There was a record decline in output for
“restaurants/hotels”, which fell 7.7 percent year on year. This
category encompasses a range of recreational services, many of them
provided by smaller companies.

These are not reflected in the
business surveys that drive sentiment in the City, and which led
economists to conclude that the UK had escaped recession.

The
widely-followed purchasing manager indices (PMIs), provided by private
firm Markit Economics, only cover 600 companies. The ONS surveys 30,000.

Not
surprisingly, its official statistics are proving a better judge of the
squeeze on smaller businesses. Many of these have suffered from the
clampdown in lending by banks as they continue to shrink their balance
sheets. According to the Bank of England, lending to companies shrank
by a record 3.5 percent in the year to October.

But
it is not just small businesses that continue to suffer from a credit
squeeze. Banks are also cutting credit lines to individuals. Consumer
credit has shrunk for four months in a row, another record. Last year’s
collapse of Lehman Brothers continues to cast a long shadow.

And wages are being squeezed as well. In real terms, wages have now fallen for five straight quarters.

All
of this is taking its toll on public finances. Last month saw a record
increase in government borrowing, a rise of £11.3 billion compared to
the same month in 2008. (This is the most useful comparison to make,
because of the strong seasonal swings in tax receipts and spending.)

Some continue to cite runaway public spending as the culprit. But the facts suggest otherwise.

So
far during the current financial year, spending has risen 6 percent
year-on-year in pound terms. That is less than the budget set by the
Treasury in April.

By contrast, tax revenues have shrunk by 10 percent. That is well beyond the 6.5 percent decline projected in April.

This
year, tax revenues as a proportion of GDP will fall to lower than any
level under Margaret Thatcher or John Major. The Tories trumpet a
low-tax economy as the way to recovery – but New Labour has already
done that, and Britain is still in recession.

Any upswing will
be slow, as companies continue to cut costs and banks retrench. The
Bank of England could cut interest rates from the current level of 0.5
percent all the way down to zero, but at this late stage the impact
would be limited.

The programme of quantitative easing – buying
gilts (government IOUs) – is more aggressive than in any other major
industrialised economy. The Bank of England is unlikely to sanction
much more of it when the budget deficit is spiralling upwards.

If
the world economy takes a turn for the worse, Britain will be in
trouble. The next government will be cutting spending and hiking taxes
in the eye of the storm.

The risks are numerous. What’s
happening in Dubai is a reminder of the credit problems that still
litter the world. In Germany, the central bank announced last week that
banks would have to find a further 90 billion euros to cover expected
losses on toxic loans.

Lending is shrinking across the Eurozone.
Banks are weighed down by bad debts. Consumer spending continues to
slide in the majority of member states. Ireland and Greece remain in
deep financial trouble.

And in the
US, Obama has failed to tackle the foreclosure crisis. By the end of
September, one in seven with a mortgage was either in arrears or in the
process of being repossessed.

Early indications from Freddie
Mac, one of the biggest US lenders (now nationalised), suggest these
delinquencies rose again last month – and the increase is accelerating.
Long-term unemployment has hit a post-war record and is driving more
borrowers to default.

Despite
repeated bailouts, capital injections and tax-subsidised incentives for
banks, the homelessness crisis is intensifying. The US faces economic
and political turmoil in 2010 if Obama does not act. And the US remains
a major risk to any possible recovery in the UK.

I
happen to agree with much of Graham's criticism. The financial
oligarchs control our economies and they're sowing the seeds of their
destruction by impoverishing millions of hard working people that are
accumulating more and more debt to make ends meet.

Graham's book
is a must read. I literally enjoyed every chapter, but my favorite one
was "Learning from the Great Depression" where he looked at the policy
mistakes that were made back then. His historical account of how
quantitative easing was used to combat the depression was a real eye
opener for me. He also went over the mistakes central bankers made by
removing liquidity too quickly (this is what really worries me
nowadays).

The book's final chapter, "Breaking from the Past" is
also worth carefully reading because it offers hope but ends with a
stark warning:

The challenges posed by many of these
issues, from democratic accountability, worker representation,
rebalancing of corporate power and climate change, cannot be ignored.
But the danger remains that the radical changes needed to our
policitcal economy will be derailed by the policy failings articulated
in this book.

If you only read one book this holiday
season, make sure it's this one. I have an eerie feeling that Graham
Turner's warning will fall on deaf ears, much to the detriment of the
global economy.

Comments

[Anonymous]

If the idea that labour needs better representation in economic decision making consider the fact that, as I understand it, unions are given a seat on German corporate boards. It's possible that it's coincidental that Germany has remained an industrial powerhouse in the face of unrelenting competition from low-wage climes while US manufacturing has been hollowed out, but I wouldn't bet on it.

If there was ever a time to ask, "Do my political assumptions make any sense?" now's it.

Why not read some "marxist" commentary. I suggest this:

http://www.nakedcapitalism.com/2009/12/in-the-eye-of-the-storm-updating-...

[AN0NYM0US]

I have said on a few occasions that Leo has been out in front of the equity markets since early this year. Leo writes good stuff and does good analysis. Moreover he brings an economic perspective that is not frequently found on ZH. I have also from time to time expressed frustration with overt and very unnecessary injection of partisan politics from Leo
(e.g. Leo Kolivakis of ZeroHedge euolgizes Ted Kennedy), though if he was speaking from a less left of center perspective it would likely not bother me as much. I am not sure that the above book review falls into this (political) category but Turner certainly appears to be a card carrying Marxist (see references below).

Perhaps it's just intolerance on my part as there are ZH writers who appear to be right of center who inject their politics and ideology into articles. And then we have other blogs such as HuffPo where their disdain for the economic leaders (Geithner et. al.) is as great as any comment you will find on ZH. And just because a guy may be a Marxist or someone with politically opposing (e.g. pro/anti global warming, health care reform, Bush/Obama etc )views does not in and of itself negate the argument they are making but should raise some cautionary flags. An unrelated example: When the likes of the CBO effectively endorses health care from an economic perspective and then you discover the director of the CBO (Elmendorf) turns out to be part of Larry's clan and a long time Fed employee it is prudent to be somewhat suspect of his motivations, arguments, data and assumptions.

references:

Graham Turner was a guest speaker (albeit a minor one) at the Marxism 2009 Festival in London Marxism Festival 2009
and the 2008 Marxism Festival, Turner also seems to hank out in Socialist circles

[Leo Kolivakis]

Trust me, Graham Turner's book is not a Marxist diatribe. If it was, I would have openly trashed it. It's short but packed with charts that support each and every point he makes. Top hedge funds and pension funds are among his clients for a reason. Read the book first and see for yourself why it's the best thing written on economics in years. It really is an excellent read.

[Anonymous]

GW,

You continually push one form or another of far left socialism as the way to fix our economic system. Socialism as a system has never worked for the benefit of workers, but it works great for those in power( like George Soros). The Austrian School of Economics has produced the only solution that is going to work. Let those that are insolvent go bankrupt, and then allow the survivors (who did not perform highly risky financial actions) to take over and grow. It is called creative destruction and is what the USA (Summers) told Japan to do back in 1989. Japan instead chose to do what we are doing ( socialize the debt)and you can see the results.

[Anonymous]

Frankly,if we are to have a system where by millions are given to few,and food stamps for the rest,then we might as well have a full blown socialism.....

[pudthepiper]

Amazing that people can write whole books babbling about their perceived understanding of the "crisis". Even more amazing that they have the arrogance to propose solutions. There is only one root cause of the "crisis"...just one, only one and it ain't going anywhere anytime ever until it burns to the ground. What you say?...Well, I'll tell ya and I don't need a book or an analysis or a white paper on it. All I need is a grade school understanding of mathematics, specifically the law of exponents. The singularity of everything in one simple sentence....Debt as money. Period, end of story, nothing more to say, nothing to pontificate on, nothing else to discuss. Debt as money vis a vis the fractional reserve banking system ensured from its inception that the day would come where debt service would overwhelm the ability to borrow more thereby perpetuating the debt for consumption model of everything. Debt carries interest, interest requires more money creation via debt to service it which in turn requires yet more money creation via debt etc etc kaboom!  Exponential money growth, interest service, debt creation to perpetuate it until it consumes itself. There...my entire book on the matter...Every word written that excludes this understanding is just sound and fury signifying nothing. It is the only thing and it, like a black hole, has an event horizon that we now approach. Game over. Snake ate its own tail. There is nothing else. Don't waste your time. It is all over, done, kaput and all the kings horses and all the kings men will not put this Humpty Dumpty back together. There is no fix....you all are wasting your time and your words.

[Leo Kolivakis]

Should we be building a bunker, stockpiling on guns and canned food, or better yet, just making funeral arrangements and slit our wrists? Some of you are so bloody pessimistic about life that it amazes me how you can go on living. Take it from a guy who has faced numerous obstacles in life, when the chips are down, you look deep in your soul and forge ahead. Read the book first and then tell me what you think.

[PierreLegrand]

Read a book written by a guy who thinks it is ok to steal another's property for the greater good? Am I hoping that I am the last person to be eaten by the alligator?

We are pessimistic because for too long folks that have your set of premises have been running our country and have driven it into the ground. And we are pessimistic because we realize that we cannot get your corrupt set of premises out of the public square before something terrible happens in this country.

I am optimistic because I see a reversal of fortune in this country. We are still heading toward a hyper-inflationary depression but the American people are rediscovering political philosophy and their innate commonsense will win the day in the end. There will be a terrible time and many will suffer but we will come back in the end.

[delacroix]

the problem isn't capitalism, it's CORRUPTION.  goldman  bernanke paulson blankfein frank  geitner  rubin  greenspan rahm silverstein,am I seeing a pattern here?  this is not anti-semitism, take a direct look at the group behind this financial highjacking , there is a common denominator.If you are a student of history, you know Ben Franklin warned America about this 200 years ago, and it's as true now as it was then. 

maybe  they think it's manifest destiny, and they have a right to take our wealth, if we can't stop them. this is an organized gang of thieves, most of them probably have dual citizenship. not long on patriotism, with no skin in the game.none of them are descendents of our founding fathers.  so much for a melting pot, the shit floats to the top, and good men get ground into poverty.

[baserunr]

I think that's close, DC.  It's not so much the corruption that is the problem, you have that everywhere (maybe not to this degree!)  It's that there are no NEGATIVE CONSEQUENCES for the corruption.  The consequence of failure in business is supposed to be bankruptcy and disgrace, not loans from the "lender of last resort" to keep going.  Not screwing over bondholders so the "workers" can then own the company.  No one is too big to fail.  Is the US Government too big to fail? No.  There is no such thing. And re-inflating the bubble will have the same consequence as it did before.  It will go pop.  And next time, the "lender of last resort" will likely go with it.

[Anonymous]

If the last names were Capone, Barzini, Gotti, Corleone, Lucci, Genovese, DeNiro, Puccini, Luciano, and Strazzi, the cry from the world would be that the Italians and Sicilians have tanked the world economy and must be stopped.

Yes, there is a pattern and for mass media to ignore it is simply more proof of which ethnic group has more power to abuse than any other.

[Comrade de Chaos]

you are missing number of names:

http://en.wikipedia.org/wiki/List_of_Jewish_economists

you could start with mr Baruch Spinoza, the original author on how to take over the world encyclopedia. Then keep voting for the morons in our government and keep pointing fingers. Will make you feel better.  

[delacroix]

voting   that function, that allows the people to relay their will to the leadership?  yeah thats really working out   TARP    EMINENT DOMAIN    MEDICAL MARIJUANA      . SPINOZA   that was funny, I'm portuguese jewish Italian Irish, with some norwegian. I guess my ancestors had a preference for exotic women, or easy women, I'm not sure    .profound thinker, but the , all rights are derived from the state belief, and no sex life, says he was missing a few pieces of the puzzle, he had qualities, but he had problems too. show me a hero, and I'll show you a tragedy.

[torabora]

Ayn Rand was far closer to the truth....this fella is just another statist.

[Leo Kolivakis]

Graham Turner's book isn't about socialism or Marxism. He alludes to Marx because Marx provides a "critical understanding of the contradictions of capitalism", but his main theory is that workers need more representation to loosen the grip of bankers. I see it with pension funds. Billions of pension contributions being shovelled into hedge funds, private equity and real estate funds and the workers don't have a clue of what the pension fund managers are doing with their money.

You can read more about Graham's book at Pluto Press:

Product Description

In The Credit Crunch, Graham Turner predicted that banks would be nationalised and interest rates would be reduced too slowly to halt the crisis. His predictions were correct. His new book, No Way to Run an Economy, is the essential guide to the turbulent times ahead.

Turner recommended radical measures, such as quantitative easing, in early 2008 but argues that action has been taken too late and been too timid to make a real difference. He dissects the policy mistakes of the last 12 months including Obama's doomed market-led response to the crisis and the obsession of central banks with the red herring of inflation. Turner also warns that the collapse of Eastern European economies will lead to political crisis in the ex-Soviet states that embraced neoliberalism and massive debt levels so fully.

There is no doubt we are in a depression, but Turner shows that learning from the mistakes made so far can prevent a situation worse than that of the 1930s crisis.

Praise for The Credit Crunch:

'Graham Turner is one of only a handful of economists to understand the roots of the current financial crisis, its implications for all of us and - crucially - what should be done now. I strongly recommend you read this book.' Larry Elliott, Guardian

'A timely analysis of the pressures on world money markets and the fundamental weaknesses in the global financial system. Graham Turner is a clear and independent voice in a confused and noisy world.' Hamish McRae, Independent

About The Author

Graham Turner is the author of the Credit Crunch (Pluto, 2008) and founder of GFC Economics, an independent economic consultancy which provides forecasting services for some of the world's largest banks. He has worked in the financial sector for over 20 years, spending the 1990s working for Japanese banks.

[PierreLegrand]

What's in a name? that which we call a rose
By any other name would smell as sweet;

Graham Turner's book isn't about socialism or Marxism. He alludes to Marx because Marx provides a "critical understanding of the contradictions of capitalism", but his main theory is that workers need more representation to loosen the grip of bankers.

Ok now I understand! You take the property away from those who have earned it...and give it to those who have not. And I guess the Government will administer the Banks for the common folks. eh...? And that isn't socialism/marxism/bullshitsm?

The quality of writing on ZH is plummeting faster than the Dow Jones did back in 08.

[AN0NYM0US]

-

[Shameful]

I have to defend Leo here.  I may disagree with him, but others don't.  He adds to the debate by being here even if there is disagreement.  His posts are well written and add other viewpoints.  I would rather there be competing viewpoints here then an echo chamber for 1 idea or 1 way of thinking.  While I may firmly believe that the Austrian school of economics is correct I have no objective way of knowing that is correct and it is good to at least see what others are thinking.

[PierreLegrand]

Hmmm not sure I am with your very measured response since thinking that socialism works is somewhat akin to believing in the tooth fairy. I don't give anyone credit for believing in the tooth fairy and I don't listen to explanations about how the tooth fairy really is real.

I just want to move on from that sort of nonsense.

Surely there is disagreement among free market lovers that ZH can feature to accommodate varying viewpoints.

Are astronomers forced to accommodate astrologists simply to show a different view point?

[Shameful]

Alright we both agree that socialism doesn't work, but there are a LOT of people in the world that think it does.  Trust me there are large pockets of them, shit I'm in the tiny minority where I find myself now.  They have every right to speak.  Shit if they talked about how Santa would slide his fat ass down the chimney or break through a window and leave people credit cards and cheese logs we would have to at least entertain them.  Why?  Because freedom is all about ideas even stupid ones getting airtime.  If we want to try to censor ideas we are no longer living up to the ideas of freedom and liberty.  So yes they can talk about censoring us, and how they will take over, and order us around at the point of a gun.  We can't take away their right to discuss it, because if we do we are no better then them.

Also with the above I am not commenting on Leo.  I'm also in now way attributing anything to him, the above was mearly ment ot be an example of things that must be tolerated.

[Shameful]

Not to go after your line of work, but why must people invest in pension accounts? Simple because they cannot simply save money. To just save money and put it in the bank is madness. This was not always the case. In the way back a person could save hard currency in his pocket or he could invest it, his choice. With hard currency there was less fluctuation of value barring odd events such as the Spanish inflation crisis, which is hardly a historical norm.

In short people are forced into pensions and the global casino because of the monetary system. Trying to correct imbalances in the later part of the machine while ignoring the first is doomed to fail. Sound money needs to be restored, or people will be forced into the casino and like all casinos the house always wins.

"Turner recommended radical measures, such as quantitative easing, in early 2008 but argues that action has been taken too late and been too timid to make a real difference."

To me statements like the above shred all credibility. This man if for the workers? Did anyone tell him that inflation is a wage destroyer? What would he have had Benrake do, fire a Quadrillion dollar torpedo into the market? I understand you like the man, but from little I see he is nothing more then a statist inflation cheerleader. If he was for the workers he would be for sound stable money so the worker could not be ROBBED by those with control over the creation of money. "I love the workers, that's why I want to see them impoverished!"

[Leo Kolivakis]

Yes, he recommends quantitative easing but not to help the banks, which he thinks need to be nationalized, but rather to help homeowners who houses were being foreclosed. His book is packed with charts backing up every point he makes. People should read it first before forming their opinions.

[Shameful]

I'll confess I haven't read it, and might a long time before I do.  I have literally a stack of books in front of me that I have been meaning to read and simply have no time so I must apologize.

Okay could you explain to me 1st how QE directly to the people would work?  Is it like a big check that gets sent to everyone like the Bush stimulus?  Also does he address the systemic damage that inflation causes even if not gifted to the central bank IE the inability to do proper accounting and the scaring off of capital and investment?  Does he address how we would deal with the monstrous bad derivative bets on these banks books (estimates place at above 100 trillion)?  Also does he address how the gang of idiots, simpletons, and thieves known as our elected officials and central bankers can pull off what sounds like a dynamic and totally new plan?

[merehuman]

whats impaired is a sense of integrety. Criminality at the top is noticed and will soon be common place. Government makes the laws, when the government breaks the laws i expect the populace to follow the example set.

Until that changes via indictments and arrests I am

long ammo, food and silver.

[Comrade de Chaos]

?

no one said capitalism is bad. It's just it or rather economy & society are changing constantly. The strength of capitalism is in its flexibility. And currently the flexibility of capitalism has been impaired to a high degree. 

[crzyhun]

Yah, it is always the capitalist pigs fault. The system should be torn down. Put the workers/unions in charge.

If these tenants were true, then why is Cuba, NK, so to be Chaves' Venezuela, and China, old Communist Russia SO BLOODY SUCCESSFUL right now and then? Workers of the world unit and sink in to proletarian muck. People were risking death to jump the Berlin wall.

[Anonymous]

This offends me Leo. You plugging a socialist author! Socialism might be just fine in the U.K. and for you Leo.
But here in America we are fighting for our freedom and liberty.
FDR pulled the socialist card and we got the great depression!
Obama has pulled the same socialist card and we are in a fight for our freedom. I'd rather another depression than hand my freedom to the statist administration in Washington.
The book that's been on the best seller list for months is Mark Levins Liberty and Tyranny you need to read!
Why do you think it's taken a year to get this far with Obamacare? It's because WE don't want Obamacare! We don't want Cap and Tax! I speak for the majority!

[Anonymous]

Mark Levin, has no problem with the United States bankrupting itself and sacrificing thousands of American lives to protect Israel. Statism that benefits Israel is fine with Levin. Useful idiots like Mark Levin, Hannity, Keith Olbermann, and Chris Matthews exist to fool people like you that there is a difference between the Democrats and the Republicans... there is no difference. The RepubliCrats support:

1. Perpetual war in the Middle East.
2. Globalization and decimation of the American workforce.
3. Goldman Sachs and JP Morgan running the Treasury.
4. Outsourcing foreign policy to the Israel Lobby.

True libertarians include Ludwig von Mises and Murray Rothbard.

[Anonymous]

You've been drinking too much of the Freedom and Liberty BS they taught you in school.

Here's a clue. The main purpose of your school was to keep you under control until you're 18. Not to make you a critical thinker, or to educate you.

Once you're 18, you have three choices. Either go to Jail, go into the military, or become a debt peon. That's it.

Yeah, yeah, you're thinking that you're the exception. So does everyone else. You're thinking that you'll pull yourself up by your bootstraps and become free. Sorry dude, that only happens for less than one in a hundred. Or one in a thousand. Who are usually crooks.

If you've got any debt, whether it's credit card, mortgage or business, you're a debt peon. And it doesn't matter how much you make.

We didn't used to be this way.

The only freedom you might have, if you're a good boy, is the freedom to have debt. Now get back to picking your green shoots.

[Comrade de Chaos]

The best fin/econ book that I ve seen this year is Predictably Irrational.  It explains why our policy makers are making such dubious decisions with such a great level of confidence. It also covers why there is little cognitive difference between an average sub-prime borrower and investment banker, despite the knowledge, education and expertise of the latest (banker.)

This book is much more daring than the "Animal Spirits" which covers those areas and money bubbles in general. 

p.s.

As of the modern economic thought, the biggest issue is a failure of any particular econ school to realize that the global economy is a living & complex system therefore some economic forces, "rules" do constantly change.

For example the model of global free trade would work well if all countries played by the same rules or all major players were on the same level (as it was prior to 1980's.) However the economic forces have changed creating unsustainable trade deficits for some of the players. And those changes are completely ignored by the most of mainstream or well known economists no matter what economic school they belong to.

[Anonymous]

Let prices reset where they may. If you bought a house that is now underwater, that's too bad. If you can't afford to make the payment, pimp out your wife & daughter and learn to steal OR move in with your parents, into a tent or whatever. Save your money and buy another house in a few years when prices are lower and your credit is once again in good standing.

Artificially keeping prices up, via money printing, will not
work.

[Shameful]

Just tell the bank to shove it.  Make them force you out.  They made a deal and part of the deal was that you might default on it.  Hell sometimes they might not even have the title to your place so you might get it for free.  The market is a dangerous place and the banks need to realize that.

Also there is nothing wrong with renting, unless housing gets really cheap I don't ever plan on buying.  I'll move around to much and I have no kids so why buy?  House ownership is not for everyone, despite what people believe.

[Anonymous]

100% agree there is nothing wrong with renting... and in fact many pluses! Ease of ability to move anywhere in the world, let the homeowner pay the taxes and deal with the city/state, let the homeowner fix items that need repair, etc. In this day and age why limit oneself to a single location for more than three to five years when there are so many great places to live (and women to meet).

Better still, renting could be called STAYCATION of the best variety :)

[Shameful]

Might have been right on the prediction, but cranking up the printing press and gifting all the banks bad paper to the taxpayers is not a solution.  As painful as it would be we have to cut the free money line and let the insolvent institutions fail.  If we continue to reward failure then failure will continue.  Nationalizing will not stop risk or failure.  You think the American Gov has done a good job with anything?  Anything at all?  So we are thinking about giving them the banking institutionswhen they have prevent to be unmitigated failure in every other activity they have tired.

It was not a failure of capitalism, there are booms and busts in capitalism.  What made this worse is a complicit central bank.  A central bank that literally papered over the Dot com crash and into the housing bubble, hell anybody else remember Long Term Capital Management and the Greenspan Put?  We don't have capitalism, we have crony capitalism, it's totally different.  In capitalism losers lose. In crony capitalism losers still win if they have enough political clout, and the state gives the bill to the citizens.  What we have to do now is let the failures fail and take the harsh punishment now instead of drawing out the agony for decades.  Capitalism made America prosperous, crony capitalism killed it, going to socialism is not the answer.

When I hear things like central economic control, nationalization, and worker veto, all I can think is "Workers of the world unite".  If that system rears it's head fully in the US(and it's mostly there now) I know I'll be on the first plane to anywhere.

[WaterWings]

going to socialism is not the answer.

Right here. This is it. Good. What can people not understand about having a gun put to their head for money. They think it's a little extreme to say, but in practice we see resisters fined and ostracized - dead at the other end of the resistance spectrum.The main problem with socialism is that the politicians always run out of other people's money. That's when the bloodletting begins.

Socialism always turns into oligarchy anyway. It would seem that every system eventually boils down to oligarchy. Even behind the dictator is a close gathering of the elite. We are seeing that now: the consolidation of power. The more and more I learn about the founding fathers, and what isn't taught in most schools, especially public ones, is that they formed a government in the most ingenious way of keeping their foes from confiscating their property. They wanted to create the most perfect system, yet known to man, of due process. Whether or not you can hire a skillful liar - er, lawyer, was not their concern - so the common man was left at the mercy of an entangling, imperfect system; no strings to pull for the rifleman in the mud. We can imagine that the founding fathers were principled arch-rivals. They were normal men, not gods. And we can see their faults, somewhat, through the lens of written hindsight, yet the public bows down to any reference of their name, regardless of how they played their hand in this short game called life.   

I have recently wiped the slate mostly clean when it comes to the founding fathers. I am now investigating and attempting to cross-reference their intentions for the 'proles', the lower classes. So far, in my deciphering of their intentions I hold Jefferson in the highest regard. What wit, insight, and integrity. I am warming up to Ben Franklin as well. I especially like this one, having read before, and am now enjoying again, but seems to be somewhat fabricated, but nonetheless entertaining:

Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote.

I have found the Anti-Federalists to be somewhat like Ron Paul; I should probably say that in reverse. They are thought to have 'lost' when it came to the ultimate settlement of The Constitution, but where would we be without the Bill of Rights?

[Shameful]

Jefferson had it right. I think we would be a lot better off had we just stuck with the Articles of Confederation. The central gov was weak, laughably weak, the way it should be.

Have you got to Hamilton yet? After reading up on him I warmed a lot to Aaron Burr.

[WaterWings]

After reading The Creature from Jekyll Island I have little respect for Hamilton - it's hard to nail any of these guys down, but I think the lines were best drawn between the Feds and Anti-Feds. Apparently Jefferson was an Anti, but he was in France at the time, so only in 'spirit'. But his choice of words generally confirm his alignment with the Anti crowd.

Reading about the Burr/Hamilton duel was amazing! I can tell I didn't have good teachers growing up because nobody pointed this out! When history is cool we'll have our country again.

The problem(s) with (re)learning history is that there is so much to read - I have to balance it out with my actual life. Ever read any Boston T. Party? 

[Shameful]

lol well I had it the other way. I was a voracious reader as a child and read a broad section of history books growing up. I was the nerdy kid in history class arguing that the Civil War(War of Northern Aggression) was about states rights and taxation not slaver. Loved when I brought up the Corwin Amendment and I would get blank looks form the teacher. http://en.wikipedia.org/wiki/Corwin_Amendment

I don't think I've read much from Boston T. Party, but his name is familiar. Does he have stuff up at Lewrockwell.com?

[WaterWings]

Same feelings on the War of Northern Agression. To me it was the largest attempt at testing the fairness and equality the founding fathers had woven into the Constitution - and it failed because it really wasn't about slavery - surprise! It's funny to see what the North did, like the Corwin Amendment - seems typical of the thinking we have now.

My take was mainly that the South was increasing trade with Europe, North imposed tariffs after losing business, Europe stopped buying cotton...South put in between a rock and a hard place: succession! The essence of Liberty: "I'm doing this as long as I want to."

The whole 'But, but Lincoln preserved the Union! argument pisses me off. Abusive husbands use the same logic. Freedom at the point of a gun.

I've never seen any Boston pieces on LRC but he is certainly an honorary member. He is referenced frequently, mostly for his Libertarian reader (in the vehicle of a 'free-stater' novel), Molon Labe, and his firearms tome, Boston's Gun Bible. He is unabashedly in support of 'liberty with teeth': "No thank you, Mr. Government agent. Just leave me alone and you'll be able to see your family again."

Very interesting, and not for everyone. As in, not everyone is willing to make sacrifices to remain free.

[Orly]

Lincoln wouldn't go along with the idea of a central bank and even sold his own bonds to his own people ("greenbacks") to finance the war, much to the chagrin of the Rothschilds and Warburg bankster oligarchy.  Egad!  He cut out the middlemen!  Now you know why Lincoln got popped, Jackson got impeached. Garfield and Kennedy got it for the same reason.

As always, just follow the money.

P.S. Very interesting posts from you boys.  I appreciate your thoughts.

[Orly]

Werd for werd.

Couldn't have said it better myself.

"Capitalism bad.  Workers good."  That is exactly what I heard, too.  And if it hadn't been one gigantic, decades-long, well-planned scheme to defraud the American taxpayer to the tune of multi-trillions of dollars, none of this would have happened in the first place.